Fitch downgrades Ecuador to ‘restricted default’ after agreement with creditors
The agency Fitch Ratings lowered this Monday, April 20, 2020, the rating of Ecuador to ” restricted default “, according to a publication on the web portal Voice of America.
This decision was made after the Government of Ecuador reached an agreement with its creditors to defer the next payments on their obligations by four months . This, according to the rating agency , is a first step in a distressed debt swap.
On its website Fitch details that the Government of Ecuador announced on April 18, 2020 that the creditors of 10 external bonds for a total of USD 19.2 billion agreed to the “request for consent” initiated on April 8 last. This will allow approximately USD 800 million to be deferred in the next interest payments until August 2020.
In accordance with the risk rating institution , the authorities have made this request to achieve relief from cash flow. This will allow the State best meets the economic crisis and health resulting from the pandemic of coronavirus .
The Ministry of Economy and Finance reported last April 17 that Ecuador obtained the approval of the Request for Consent made on April 8 “in order to defer interest payments until August 15, 2020, in this way , start the ordered process of improving the profile of your debt. ”
The Finance Portfolio also said that “from this date and until August 15, the Government of Ecuador will continue a dialogue with bondholders to reach agreements, in an orderly manner and thus improve their debt profile. This consent is part of the comprehensive strategic plan for the country’s external debt management , promoted by the President’s administration. ”
“They plan to use this four-month waiting period to seek a comprehensive restructuring of those bonds to ensure debt sustainability, as well as a new ‘successor program to the Expanded Fund (EFF) with the International Monetary Fund (IMF). “Fitch quotes.
The rating agency assured that this change in the terms of the existing external bonds implies a substantial reduction in the terms for the creditors of the bonds and it was agreed to avoid a total default in the payment of these securities .