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May 11 (Bloomberg) -- Ecuador’s bank loans declined for a fourth month in April, extending their steepest drop since at least 2000, as a plunge in foreign reserves following President Rafael Correa’s debt default left lenders cash-strapped.
Bank loans slid 2.5 percent in the month, according to the country’s bank and insurance regulator. They have dropped 7.3 percent this year. Deposits, which are down 4.1 percent this year, were little changed in April, rising 0.6 percent.
The default “created alarm and nervousness,” said Fernando Vivero, executive vice president at Banco de la Produccion, or Produbanco, the country’s fourth-largest bank, in Quito. “It’s one of the causes of the drop in liquidity.”
A 30 percent tumble in the central bank’s foreign reserves since the December default is draining the money supply because the oil-exporting country uses the dollar as its currency. The lending decline is deepening the economic slump and adding to pressure on Correa to scrap dollarization, said Alberto Bernal, head of emerging markets research at Bulltick Capital Markets in Miami.
Printing money is “a simple way of expanding the nominal economy; Correa can’t do it,” Bernal said. This “makes things very complicated.”
Correa, an economist who earned his PhD at the University of Illinois at Urbana-Champaign, said on April 27 that he’ll maintain dollarization.
“As an economist, I know how to do that in face of all difficulties,” Correa said a day after winning re-election. In a speech two years earlier he had called dollarization a “complete failure.”
‘Difficult to Keep Up’
This year’s drop in bank lending is the biggest since the South American country first began using the dollar as its currency in 2000 following a default and tumble in its currency, the sucre, a year earlier.
The financial system lost $750 million in deposits from January through April as the government and private clients withdrew funds, Fernando Pozo, head of Ecuador’s Association of Private Banks, said today in an interview with the local Ecuavisa television network. He said banks have brought $800 million back into the country from overseas investments to help finance domestic lending.
“If deposits fall, it is difficult to keep up the same expansive credit policy we have had the past five years,” said Pozo, who is also the chief executive officer of Banco Pichincha CA, Ecuador’s biggest bank.
10 Percent Contraction
Correa halted payments on $510 million of bonds due in 2012 in December and $2.7 billion of bonds maturing in 2030 in March, calling the debt “illegitimate” and “illegal.”
Finance Minister Maria Elsa Viteri said earlier this month that the government could pay more than 30 cents on the dollar to holders of the bonds, which were issued as part of the restructuring following the 1999 default.
Bernal forecasts the economy will contract 2.5 percent this year after expanding 6.5 percent in 2008 as the 61 percent drop in oil from a July record cuts into government revenue. Crude accounts for about 60 percent of Ecuador’s exports.
Luis Carlos Nino, a Latin America economist at Capital Economics in London, predicts the Andean nation’s economy will shrink 10 percent this year. The government expects the economy to grow more than 2 percent.
“What’s most worrying is that if banks don’t lend, the economy doesn’t grow,” said Produbanco’s Vivero.
QUITO (Reuters) - Ecuadorian banks will see their deposit levels fall further if the government fails to resolve a debt default that has severely limited financing, the head of the country's largest private bank said on Tuesday.
Pichincha bank CEO Fernando Pozo, who spoke at the Reuters Latin American Investment Summit in Quito, said the country has failed so far to inject liquidity into the economy to help private banks reeling from the global financial crisis.
"Bottom line the default has limited international financing for us ... our credit lines have been reduced," Pozo said. "The government needs to get financing from any source to inject resources in the economy and help the banks."
Pozo, who is also the head of the country's private banks association, said the fall in deposits is also due to lower oil prices and the government's failure to secure international financing and calm international markets after the default. Oil is Ecuador's main export.
He also said banks will have to continue limiting credit to make up for the drop in deposits and safeguard liquidity.
"The dynamic of credits will depend on the dynamic of deposits and access to international financing."
Pichincha has seen deposits fall 5 percent in the first quarter of 2009 compared to 10 percent growth in the same period last year.
The bank, which is by far the country's largest in terms of deposits, expects net profits this year to drop to 2007 levels of about $60 million. The bank will also cut investment to $25 million in 2009 from $35 million last year.
QUICK FIX TO DEFAULT
He added the government should strive to "properly" fix the debt default and seek financing even from lenders Ecuador has previously criticized like the International Monetary Fund and World Bank.
Ecuadorian President Rafael Correa, a leftist former economy minister, defaulted on $3.2 billion in foreign debt last year over charges those credits were "illegally" issued by past administrations.
Since he took office in 2007, Correa has increased state control over private banks, which he accuses of financing the right-wing opposition. His government has set liquidity levels for the system and raised taxes on banks' assets abroad.
Correa said financial institutions are being overly cautious and should hand out more loans to jump-start an economy that he expects will grow around 2.5 percent this year.
His government has offered to buy back the defaulted debt at a 70 percent discount in an effort to fix the default and reestablish relations with debt markets. It is not yet clear if most holders of Ecuadorian debt will agree to the buyback.
Ecuador's default was the second in a decade following a crippling financial crisis that left thousands of Ecuadorians without their life savings.
Supposedly there will be a conference call today with the majority of the bondholders and the Ecuadorean Government. Which we believe is one big lie. Our Group that represents almost 200 million US $ in Ecuadorean Global bonds has not been contacted or invited to the conference call. This is very normal behavior for socialist and communist governments that want to brainwash the people thru lies and deception. For Ecuador to goto these measures shows that have nothing to stand on. Do not let them scare you, as a bondholder you have many more rights than they have. Thru due process 100% of your Capital and Interest payments plus attorneys fees can be covered, All of these rights you have are stated in the securities documents Ecuador signed to issue these bonds. The Ecuadorean Government is very concerned that they cannot receive new capital until they deal with there bondholders as the IMF has required them to do so. Being a dolarized nation Ecuador has to much to lose. If you would like a recommendation for your legal defense please contact us. stay strong a 70% loss is not possible.
May 1 (Bloomberg) -- Ecuador bondholders owning 25 percent of the country’s $510 million of defaulted bonds due 2012 demanded they be paid back in full immediately, undermining the government’s offer to buy back the debt at a discount, said JPMorgan Chase & Co.
Ecuador defaulted on $3.2 billion in bonds due 2012 and 2030 -- close to a third of its foreign debt -- on Dec. 12 after a commission President Rafael Correa installed said it found evidence of criminal wrongdoing tied to their issuance. The government has offered to pay 30 cents for every $1 in the bonds’ face value under the auction announced April 20.
The government was notified of the bondholders’ decision to reject the buyback offer by the U.S. Bank National Association, which serves as their trustee, Quito-based brokerage Analytica Securities said in a note to clients dated yesterday. Bondholders reached that decision on April 27, JPMorgan said.
“The move raises the prospects of a formal lawsuit from bondholders that could potentially complicate Ecuador’s ability to successfully carry out its proposed buyback transaction and/or continue to service ‘legitimate’ global ‘15s”, JPMorgan strategist Ben Ramsey wrote in a note to clients today.
Ecuador’s 2012 bond fell 1 cent, or 3.2 percent, to 30.50 cents on the dollar at 4:58 p.m. in New York, according to JPMorgan. The nation’s $650 million bonds due 2015 lost 1.25 cent, or 2.8 percent, to 43.50 cents on the dollar.
Calls to Economy Minister Diego Borja’s mobile phone were not immediately returned. Ecuador government offices were closed today for a national holiday. Amy Frantti, a spokeswoman for the U.S. Bank National Association, declined to comment.
‘Less Passive’
“Bondholders seem to be finally becoming less passive in their response to Ecuador’s politically motivated bond default,” Ramsey wrote. “The move was a bit surprising insofar as we had presumed that Ecuador might have obtained a blocking position by buying 75 percent of the bonds in the secondary market in the aftermath of the November default.”
Finance Minister Maria Elsa Viteri is scheduled to hold a conference call with bondholders to discuss the auction on May 5.
On the conference call, “the government is nearly certain to present as a unique opportunity to get paid and as a take-it- or-leave-it proposal,” Ramsey said.
To contact the reporters on this story: Fabio Alves in New York at
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; Stephan Kueffner at in Quito at
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QUITO. El Ministerio de Finanzas invitó al diálogo a los tenedores. Su titular, María Elsa Viteri, estuvo el miércoles en Carondelet.
Los tenedores de bonos Global 2012 dieron el primer paso para una demanda internacionalcontra Ecuador, al notificarle al Gobierno la “aceleración del total de la deuda externa” correspondiente a ese tramo o el pago inmediato de $ 510 millones.
El 27 de abril, la Asociación Nacional de Bancos de EE.UU., como fideicomisaria de los tenedores, notificó al país con dicha aceleración, que significa declarar “de plazo vencido y de pago inmediato la deuda”, explicó Ramiro Crespo, de Analytica Securities.
Do not accept the 30 cent debt buyback proposal, this is the time to seek litigation please contact us if you need recommendation for council against Ecuador. You would have to be out of your mind to accept Ecuador's offer.
We were informed that in Ecuador the government has been telling the press that they have spoken to the bondholders and have come up with a solution to restructuring their debt. As far as we know that is not true. We have not been contacted by them, we were not in any conference call with them and no they have not presented us with any solutions. We were only contacted by Lazard LTD to let them know the exact amount of bondholders we represent. We do have confirmation that the Minister of Economy of Ecuador Maria Elsa Viteri has been purchasing the Ecuador Global Bonds through Banco Del Pacifico in Guayaquil from Mr. xxxxxxxxx in their securities department. The Government has been paying its own bank a commission of a little less than 1% for buying as much of its debt back as possible. They have done everything possible to bring the price of these bonds down so they can buy them back themselves, this is considered illegal it is called insider trading or manipulating the markets for you own benefit. This communication has been made to let you know that we have made no negotiations with Ecuador, we really do not understand why they say we have. Ecuador has been purchasing its own bonds back so in the future when they get sued by the bondholders there will be less of them to deal with. We will not accept any losses in restructuring our Ecuador Global Bonds a debt is a debt wether they say it was made illegitimately or not it will not be renegotiated. In the bond prospectus(contract) that ecuador signed to make these bonds it states specifically if they are late on the interest payment on any one of the 3 ecuador global bonds the full capital and back interest would be due immediately on all 3 bonds. We would recommend not to accept the restructuring offer as a bondholder you are in a much better place than the country the issued these bonds, it does not matter how many people accept unless 100% of the bondholders accept the restructuring Ecuador can not issue new securities, Argentina is a good example. The bondholders actually have the upper hand. please contact us if you have any questions.
We would like to thank all of the Ecuador Global Bondholders waiting for some type of formal offer from the Ecuadorian Government for being so patient up until now . We have been contacted by Lazard the company that made the Argentinean Bond Exchange and now, handling Ecuador's Bond Exchange. Lazard for now is only trying to identify the bond holders they want to know how many of us is there and how much of which global bond we hold, they do not want the details of our names or locations. We would not recommend telling them our names. They would also like to know where we purchased our global bonds. Has any of you been contacted by Lazard? Supposedly on the 20th of April 2009, Ecuador will be formally announcing their offer. Please contact us with what kind of offer you would be willing to take if any. Since these bonds were contracted in The USA you have up until 5 years after the default to make a legal complaint. We know that the price of these bonds since the default has been around 30 so to accept an offer of 30 now would be unrealistic. If you would like a copy of the form Lazard wants the Bondholders to fill out please contact us. please tell us your thoughts on this matter. The ecuadorian press is waiting for a press release from us this week and your thoughts would be greatly appreciated. Thank you Ecuador Bondholders Group.
As all of you should know by now Ecuador decided to make an interest payment only on the 2015 global bonds and not the 2012 or 2030. But none of the 2015 Bondholders have received their interest yet. The reason the 2015 global bondholders have not received their interest is because by contract Ecuador is obligated to pay equal shares to all bondholders of ecuador global bonds during a default. This is evidence that Ecuador has no legal plan or strategy what so ever. While the Ecuadorian Government declares all of their debt illegitimate they decided to pay one debt and renegotiate another. At the moment we have a legal team working on having market manipulation charges pressed against President Correa's top Minister Ricardo Patino (link) . Since President Correa has taken office he has surrounded himself with corrupt politicians and has lead his nation as more of a Dictator than a leader. Everytime one of his cabinet members is charged with corruption he does everything possible to protect them and make no comment. Ecuador has no case against the bondholders, the Bondholders had nothing to do with the corrupt politicians in Ecuador. The case against Ecuador is very much an open and shut case. We recommend that all Bondholders go into litigation against Ecuador if you would like to join our legal team please contact us if you have your own Attorneys we can provide the information, bond prospectus and evidence your legal team will need. Our Legal team already has Judgement against the Argentinean Bond Default (link).
Unless the bond buyback is for 100% of your capital and interest do not accept it, it is only a ploy to trick bondholders out of their legal rights. please contact us if you have any questions.
QUITO, Jan 17 (Reuters) - Ecuador has hired Lazard Freres, an advisory firm that helped Argentina after its debt default, to oversee the restructuring of $3.2 billion in unpaid global bonds, President Rafael Correa said on Saturday.
Correa, a socialist, shocked investors by refusing to repay global bonds because he said the terms negotiated by previous governments were unfair. Ecuador's default was the Andean country's second in a decade and the first in Latin America since Argentina in 2002.
Correa said the planned buyback of its 2012 and 2030 bonds would also include an overhaul of their terms.
"We will do a buyback along with a restructuring," Correa said during his weekly radio address. "And we are being advised by France's Lazard, a group I met when I was economy minister in 2005."
Minister of Economic Policy Diego Borja told Reuters the government was working with the Paris-based firm, but did not give details on the restructuring proposal it planned to deliver to bondholders.
Lazard Freres, French subsidiary of Lazard LLC, was one of the firms that advised Argentina in restructuring its debt after it defaulted on some $100 billion loans at the height of an economic crisis in 2002. The country's 2005 debt restructuring drastically cut the face value of most of its defaulted loans.
Lazard spokeswomen in New York and Paris were not immediately available for comment.
Hiring Lazard Frere as its debt adviser could help Ecuador avoid further missteps in its strategy and increase its chances of a successful restructuring, some experts say.
Jan. 17 (Bloomberg) -- Ecuador has hired investment bank Lazard Ltd. to advise it on its plan to buy back at a discount $3.2 billion in bonds due in 2012 and 2030, President Rafael Correa said.
Ecuador, which considers the bonds “illegal” and “illegitimate” following a government-sponsored audit, wants Lazard to help the government decide on the exact terms of a restructuring, Correa said today during his regularly scheduled radio-and-television address.
“I’ve known them since 2005, when I was economy minister,” Correa said, speaking of the firm.
On Dec. 12, Ecuador defaulted on its 2012 bond, the South American country’s second default in a decade. The main issue the government has with the debt is its price, Correa reiterated today.
A U.S. team of lawyers continues to prepare a legal defense should bondholders sue the government, Correa added.
“We’ve always known there are risks,” Correa said today.
Bonos: Contrato dispone repartir el pago por igual
Hasta ayer, el Fiduciario de los tenedores de los Global 2015 no distribuía el dinero
Aunque el Gobierno transfirió el martes los $30,47 millones correspondientes al pago de los intereses de los bonos Global 2015, hasta ayer los tenedores de estos papeles aún no recibían sus recursos, según publica un reporte de la entidad financiera internacional Merrill Lynch.
El ex ministro de Finanzas Armando Rodas, expicó que esto obedece a que una de las cláusulas del contrato de los bonos Global, establece que cualquier pago que se haga (en medio de una moratoria) los recursos deben ser distribuidos proporcionalmente entre todos los acreedores. "Los tenedores de los Bonos 2012 pueden pedir que los $30,47 millones que pagó el Ecuador se dividan de forma proporcional", indicó.
En este sentido, a pesar de haber calificado a los bonos 2012 como ilegítimos y, en consecuencia, haberlos declarado en "default"; el Gobierno terminará pagando no solo a los tenedores de los bonos 2015 sino también a los que poseen los 2012.
"Por eso es que hasta el momento no se han distribuido los recursos", sostuvo, por su parte, Ramiro Crespo, de Analytica Securities, quien ratificó que ninguno de los acreedores puede ser discriminado.
"Eso demuestra claramente que el Gobierno no tuvo una estrategia bien definida al momento de pagar los bonos 2015", indicó por su parte, el también ex ministro de Finanzas, Mauricio Pozo.
En todo caso, ahora el presidente Rafael Correa planea una propuesta de compra. El objetivo sería quitarle "la mayor fuente de ilegitimidad, que fue el alto precio a la que se renegoció (la deuda), y estimar los precios a los cuales debió canjearse". "Entonces, la ilegitimidad ha tenido precio", añadió Rodas, quien aclaró que el Gobierno cometió un delito al anunciar su estrategia sobre el tratamiento de los bonos. "La Ley lo prohíbe", dijo. (GC)
By Naomi Mapstone in Lima and David Oakley in London
Published: January 16 2009 02:00 | Last updated: January 16 2009 02:00
Ecuador yesterday promised to pay investors some of their money back on defaulted bonds in a move closely watched by the market because of its implications for other Latin American and emerging countries.
The buy-back offer is likely to involve a large so-called haircut of 70 per cent with the government expected to pay only 30 cents on the dollar. There was little reaction in the markets, although a decision earlier in the week by the government to service some of its debt has given support to its bond markets.
President Rafael Correa Stated that he is going to make an offer to the bondholders to buy their Global Bonds back. He said " We are going to make an offer to buy back this illegal debt, but we are going to get rid of this source illegitimacy that is the high price that they were purchased." He said the Global 2012 and 2030 are illegal because of the irregularities in their emission.
Espanol (Fuente El Universo)
"Vamos a hacer una propuesta de compra de esa deuda ilegítima, pero quitándole la fuente de ilegitimidad que fue los altos precios a los que se compró", dijo Rafael Correa durante el informe de gestión de dos años al país.
Los bonos Global 2012 y 2030 son ilegítimos por las irregularidades en su emisión, dijo el mandatario.
Ecuador declaró una moratoria sobre sus bonos Global 2012 en diciembre, argumentando ilegalidad e ilegitimidad en base a los resultados de una auditoría aplicada a la deuda pública.
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Jan. 13 (Bloomberg) -- Ecuador made an interest payment on its bond due 2015 today after defaulting on other debt for the second time in a decade, Finance Minister Maria Elsa Viteri said. The bonds rallied to two-month high following the announcement.
The government, which on Dec. 15 invoked a 30-day grace period on the $650 million bond, has decided to honor the obligation, Viteri said today in Quito. The government views the bond’s legality differently than that of its bonds due 2012 and 2030, Viteri said.
QUITO, Jan 13 (Reuters) - Ecuadorean Finance Minister Elsa Viteri will announce at 1700 GMT if the government will repay the interest on its 2015 global bonds due on Jan. 15 -- the first global bond payment deadline for Ecuador after the country defaulted on another bond last month.
"At 12 (p.m.) (1700 GMT), we will make an announcement to the press," Viteri told a local radio station. "Its precisely about the 2015 global (bonds)." Viteri added that her government has not used money from the social security institute to buyback global bonds amid speculation by analysts and local media the country has bought back more than $600 million of its global bonds. Last month, Ecuadorean President Rafael Correa announced he would not meet an interest payment due on Dec. 15 on its 2012 global bond. He also declared default on Ecuador's global bond debt, citing a government determination that the bonds were contracted illegally by past administrations. Correa, who for years threatened to stop debt payments, has said his government will buy back the $3.8 billion in global bonds at a "very large" discount in January. The face value of the global bonds was $510 million for the 2012 issue, $2.7 billion for the 2030 and $650 million of the 2015 bonds.
DIFFERENT TREATMENT? But recently Correa has said his government could give a different treatment to the 2015 global bonds, prompting analysts to believe he plans to honor that debt. Central Bank chief Carlos Vallejo later told Reuters the government has not yet ordered the payment of the 2015 bonds, whose next interest payment, of $31 million, is due on Jan. 15. The government invoked a 30-day grace period in December to decide whether to meet that interest payment on the 2015 bonds and analyze its legitimacy. Viteri said there will be more announcements about debt strategy in coming days, but declined to elaborate. She said last week the government had until Jan. 14 to unveil its restructuring plan. (Editing by Walker Simon) (
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RTRS-UPDATE 1
Jan. 12 (Bloomberg) -- Lawyers for a group suing Argentina to collect on defaulted debt said they’re closer to seizing Argentine assets in the U.S. after winning eight judgments totaling $2.2 billion.
The judgments, issued by U.S. District Judge Thomas Griesa on Jan. 9, will let the bondholders in the class action try to get Argentine government property, including funds frozen under court order. Argentina has 30 days to appeal the decisions, which range from $95 million to $543 million, plus interest. Griesa has issued similar judgments to plaintiffs suing on their own.
El jueves se anunciará si se paga o no el cupón de los bonos globales 2015
El Gobierno tiene tres días para oficializar su plan de reestructuración de los papeles de la deuda comercial.
El plazo se impone porque el jueves 15 de enero termina la prórroga que el Ecuador tenía para cancelar el cupón de intereses -por 30,4 millones de dólares- de los bonos Global 2015.
Y aunque se daba por sentado que el Gobierno iría hacia una recompra de los bonos globales -con declaraciones del mismo Presidente de la República y del ministro coordinar de Economía- la ministra de Finanzas abrió el abanico de posibilidades respecto de la propuesta que podría hacer el país.
La recompra con un descuento del 70% del valor nominal de los bonos es una de las alternativas. “Es una de las opciones que se ha analizado. Si nos vamos por esa es que podemos afrontarlo”, aclaró Viteri.
La otra posición es una reestructuración de las condiciones de los papeles; aunque no se descarta que el Gobierno presente una propuesta diferente para cada tramo de los bonos globales. “Hay que ver porqué y cómo fueron emitidos cada tramo de los bonos”, dijo la ministra. La funcionaria tenía previsto trabajar el fin de semana para terminar la redacción del plan. (IGF)
The Ecuadorian Government has stated that most of the holders of the Ecuador Global Bonds are Speculators that purchased their bonds in prices of 20 to 40 cents on the Dollar. The president of Ecuador has always referred to the bondholders as Financial Vultures.
“We will make a proposal to rebuy these bonds, many of which have already given great yields to these speculators,” Correa said. “It’s likely that those who hold the bonds now didn’t buy them at 100 -- rather at 20, 30, or 40 -- so it’s not like these people are being hurt.”
We the E.B.G. are very familiar with these Global Bonds, we know that they had been trading at prices of 95 to over 105 for quite some time now.
In their last act of bond price manipulation the Ecuadorian Government announced on the 13th of November 2008 that they would need the allowed 30 extra days before making a coupon payment on the Global 2012 bonds, stating they were under investigation. It has been alleged by many that the Ecuadorian Government was expecting a bunch of bondholders to sell so Ecuador could buy their own debt back at a discount and it is said that they did but it was not enough, most of the bondholders did not want to sell with a loss. The original bondholders were confused in what to do, Ecuador had given false signals before in relation to paying their coupons. Most Bondholders did not sell.
One of the questions concerning Latin America in 2009 is whether or not the region will be plunged into yet another dismal round of debt defaults as commodity prices stay low and foreign capital inflows frozen solid.
For the skeptics, Ecuador is Exhibit A. In the context of a region that gave birth to the term "serial defaulter", Ecuador's mid-December decision to default on its bonded debt is an alarming development.
Unless you happen to own the bonds (and at this point only the most risk-addled investors probably do), ignoring the debt dustup in Ecuador is easy. Hasn't President Rafael Correa, that scourge of the neo-liberals, been itching to do just this for years? Besides, the amount of bonded debt involved - $3.6 billion, at most, including bonds that Ecuador has probably repurchased is not a systemic threat. For the casual observer, the action by Ecuador has a sort of hard-to-fathom, out of the blue character. After all, Ecuador was sitting on international reserves of $6 billion at the time it declared default, facing annual interest payments on the debt of less than $400 million. In these circumstances, what really could be gained compared to the costs of default?
