Ecuador Credit Rating Raised by Moody’s on China, Finances

Ecuador’s credit rating was raised by Moody’s Investors Service, adding to a bond rally that’s sent benchmark yields to a four-year low, after $7.27 billion of loans from China shored up the government’s finances.

Ecuador’s sovereign credit rating was raised one step to Caa1, seven levels below investment grade, with a stable outlook, Moody’s said today in a statement. Access to loans from China shores up government finances while its debt load compares favorably to higher-rated peers, Moody’s said.

The South American country, which forecasts a $4.23 billion budget deficit this year, has relied on rising oil prices and tax increases to fund government spending that’s more than doubled since 2007, while drawing on loans from China and multilateral lenders to cover shortfalls since defaulting on $3.2 billion of international bonds in 2008 and 2009.

“In spite of its lack of access to international capital markets since 2008, after the government defaulted on its 2012 and 2030 Global Bonds, Ecuador has managed to secure significant amounts of external financing from China,” Moody’s analyst Sarah Glendon said in the statement. Concerns remain “about the government’s willingness to pay, particularly in light of its 2008 strategic default, ongoing high levels of social spending, dependence of government revenues on oil, and limited access to external financing.”

The yield on Ecuador’s benchmark dollar bonds due in 2015 fell 15 basis points, or 0.15 percentage point, to 8.32 percent as of 5 p.m. in Quito, its lowest level since June 2008, according to data compiled by Bloomberg. The security’s price rose 0.43 cent to 102.92 cents on the dollar.

To contact the reporter on this story: Nathan Gill in Quito at ngill4@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at Papadopoulos@bloomberg.net

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.