Finance is ready to re-profile part of its debt in bonds
Ecuador will return in the coming months to international markets. But this time it will not be to get more money, but to re-profiling part of its bulky debt that has accumulated for the issuance of sovereign bonds in the last six years.
The Ministry of Economy and Finance (MEF) informed EXPRESO that they are preparing a process called ‘liability management’, which means managing obligations or debts in order to re-profiling them. In the case of Ecuador, one of the options considered is to increase the term of payments so as not to affect the State’s pocket.
It would be a bond issue with a proposed exchange, that is, an agreement to exchange bonds that are close to expire and have to be paid soon by others with a longer term, explained Gustavo Arteta, Pharo’s senior economist for Latin America. American investment fund.
“In that way, we can alleviate financing needs and accelerate macroeconomic objectives,” the MEF said yesterday.
Finance added that, because they are negotiations in progress, the details will be known once they are concluded and that at the moment they are fine-tuning what the mechanism will be.
How the Ecuadorian debt will be paid in bonds has been a big question, both for the Government and for international markets. From 2020 the State will have to assume, year after year, up to 2029 payments that surpass the 1,000 million dollars to the holders of the Ecuadorian papers. Only next year 1,500 million dollars should be canceled that would swell the state budget.
When will the reperfilamiento be completed? The MEF said they expect the operation to be carried out this year.
Kevin Daly, Senior Investment Manager at Aberdeen Standard Investments, a British investment fund that has acquired Ecuadorian bonds, assured this newspaper that they expect the transaction to take place in the coming months, after a successful first review of compliance with the goals. of the agreement of the International Monetary Fund (IMF), that is between July and August.
These types of operations are carried out as far in advance as possible, said Ramiro Crespo, CEO of Analytica Securities. The transaction is normal “while everything is under the rules of the market,” said Arteta.
For now, the authorities will be waiting for it to further improve the country risk, which these days fluctuates by 550 points, said José Orellana Giler, economic analyst.
Arteta explains that not all the debt that the Government is seeking to re-profile could be exchanged. That is, investors could accept only one part and, despite this, it is beneficial for Ecuador.
One of the alternatives is to ask for cash to prepay the bonds or direct redemption is requested and, in case of exchange, the cost is negotiated, the amount of bonuses, the times, among other parameters.
Liability management is very common in companies so as not to accumulate payments and worry their creditors. It is a sign of prudence, says Crespo. (I)