Two groups of Ecuador bondholders have proposed revised restructuring terms to the government as it seeks to strike a deal to renegotiate $17.4 billion in debt.
The government’s proposal already has the backing of one group of creditors, holding around half of the bonds and including AllianceBernstein, Ashmore and BlackRock.
Yet a steering committee including Amundi, Contrarian Capital Management, Grantham Mayo Van Otterloo & Co, and T Rowe Price Associates, representing a group of more than 25 institutional investors and an ad hoc group of holders of notes due in 2024, have said the terms must be improved. They have holdings of more than 25% in certain series of the bonds and more than 35% in others, the committee, advised by BroadSpan Capital and UBS, said in a statement on Monday.
The government needs to get approval from two-thirds of the aggregate majority of bondholders, or 75% in the case of the 2024 bonds, to push ahead with a deal.
That would trigger collective action clauses, designed to help push through an orderly debt restructuring by requiring only a majority of creditors to agree to change payment terms or restructuring.
Under the current deal, 10 existing bonds maturing between 2022 and 2030 would be swapped for three bonds due in 2030, 2035, and 2040, with a nominal 9.2% haircut on the face value of the bonds, trimming $1.7 billion off the principal due.
The steering committee for the group of more than 25 institutional investors and ad hoc group of holders of notes due in 2024 proposed a 10% principal haircut be applied to the outstanding principal of the new bonds. However, the new bonds exchanged for the existing 2024 bonds would not be subject to any principal haircut, it said in the statement.
The committee proposed an extension of maturities in existing bonds in the new bonds, with the earliest final maturity in 2030. Amortization would begin in 2026.
The government in April reached a deal with the bondholders to delay interest payments through August, as the oil plunge and coronavirus weighed on public finances.
Quito last week said it planned to formally launch consent solicitation over the debt revamp in the short term.
“The SC (steering committee) remains engaged in good faith discussions with the Ecuadorean authorities and hopes to have an agreement in principle in the very near-term,” the statement added.
Speaking earlier in the day, Tiago Severo, vice president of Latin America economic research at Goldman Sachs said the scope for adjustment in the government’s offer was “not large given the challenging fiscal and macro situation.”
Reaching a deal with creditors by August was a realistic timeline, said a source familiar with the thinking of creditors.
“There is an urgency about dealing with the situation - the crisis on the ground is quite severe so removing the uncertainty is quite important,” the source said.
“Also, there are elections coming up next year in Ecuador and if the government doesn’t deal responsibly with the debt and reach an agreement with the IMF on the back of the restructuring with the private sector, that could create real political chaos in the country in the run up to the election.”
The finance ministry did not immediately respond to requests from Reuters for comment.