Greylock Capital Management LLC said it helped orchestrate a deal between Ecuador and bondholders that will allow the country to buy back about 80 percent of its remaining defaulted debt.
Greylock Chief Executive Officer Hans Humes, who has helped negotiate restructurings from Belize to Greece, said Ecuador agreed to better terms than the 35-cent offer it made in an original buyback in 2009. He declined to give the exact value that Ecuador will pay for the notes that were due in 2012 and 2030. The New York-based hedge fund, which oversees about $850 million, is one of the debtholders, he said yesterday.
The accord would help pave the way for Ecuador to sell bonds in international markets for the first time since the country’s $3.2 billion default five years ago. Ecuador Finance Minister Fausto Herrera and Economic Policy Minister Patricio Rivera didn’t respond to telephone and e-mailed requests seeking comment on whether an agreement on a buyback has been reached.
“Ecuador is trying to resolve its issues with the international financial community,” Humes said in a telephone interview from New York. “Given that they approached the issue in good faith and a willingness to meet halfway, we, as creditors, felt we should approach a resolution in the same way.”
While the country bought back more than 90 percent of its defaulted bonds months after it stopped payments, a portion remains in the hands of investors who refused to tender them. Retiring the securities would help protect a new bond sale from any possible legal wrangling stemming from the default, according to Moody’s Investors Service.
Since the end of last year, the government has sought to reduce its outstanding debt by repurchasing the defaulted securities, Sarah Glendon, a Moody’s analyst, said May 6. About $120 million remained outstanding as of March, she said.
Offers had topped 50 cents on the dollar, two investors with the knowledge of the terms said earlier this month. The price on defaulted securities due 2030 has surged 7.9 cents on the dollar over the last 30 days to 54 cents, data compiled by Bloomberg show.
The South American country hasn’t publicly disclosed how much of the defaulted bonds remain in investors’ hands and didn’t respond to information requests made through the Finance Ministry’s press office.
President Rafael Correa, a 51-year-old former economics professor, called the bonds “illegitimate” when he halted payments in 2008 after a commission he formed the year before said the debt showed “serious signs of illegality.”
The government kept making payments on bonds due in 2015, which Correa helped structure during his time as finance minister in 2005. Yields on those securities have plunged 1.25 percentage point this year to 4.93 percent as of 2:41 p.m. in New York, according to data compiled by Bloomberg.