Last year was tumultuous for Ecuador. A president was ousted, a spat with the World Bank threatened to get out of hand and there were genuine fears that the sovereign might default. At long last, though, there are signs that Ecuador might be on the path to recovery, not least because of the strong support that the sovereign received for its first bond issue in six years.
In December, the Andean nation sold $650 million of 10-year bonds, its first transaction since it defaulted on its Brady bond debt in 1999. The deal, which was lead managed by JPMorgan and Deutsche Bank, was more than two times subscribed, and was priced to yield 10.75%.
The purpose of the transaction was to improve the country’s debt profile. The money raised through the issue, together with a $400 million loan, will be used by the government to buy back $600 million of local debt and $250 million of global bonds due in 2012. Ecuador is obliged to buy back 10% of its 2012 global bonds annually, starting from next year.
The bond’s success is testimony to Ecuador’s improving credit and political story. The deal was originally scheduled for April but had to be postponed because of a political crisis in which president Lucio Gutiérrez was ousted.