Ecuador Pension Fund Plans $200 Million Bond Sale to Test Market

The lending arm of Ecuador’s state- run pension fund plans to sell $200 million of bonds in international credit markets this year to take advantage of lower rates, the unit’s chief executive said.

Banco del Instituto Ecuatoriano de Seguridad Social, known as Biess, is in talks with banks over the debt sale, Chief Executive Officer Efrain Vieira said today in an interview in his office in Quito. While the banks are indicating that Biess could issue bonds at an interest rate of 7 percent to 7.5 percent, Vieira is trying to push them to 6.5 percent, he said.

“There’s a trend toward rates falling,” said Vieira, 48. “At the end of this year we hope to be able to place at least $200 million of notes outside of Ecuador.” Biess manages $9.53 billion for the country’s retirees.

Ecuador’s government, which hasn’t issued foreign debt since defaulting on $3.2 billion in 2008, has relied on funding from China, credit from multilateral lenders as well as loans from Biess to finance spending.

Yields on Ecuador’s 2015 dollar bonds have fallen 95 basis points, or 0.95 percentage point, to 7.83 percent this year, according data compiled by Bloomberg. The country is rated B by Standard & Poor’s, five levels below investment grade.

Getting a lower rate on the Biess bonds is important because it might set a precedent for the sovereign to return to the market, Vieira said.

“We need to agree on a convenient rate for Biess and the government, because if I fix an international rate, this could generate unnecessary noise,” he said.

The plans by Biess to issue debt were reported earlier by Dow Jones Newswires.

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

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