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UPDATE 1-Ecuador says won't pay 2015 bond interest on time

Published 12/15/2008, 02:41 PM
Updated 12/15/2008, 02:45 PM

(Recasts, adds finance minister's comments)

By Alonso Soto

QUITO, Dec 15 (Reuters) - Ecuador will not pay interest on its 2015 global bonds on time, Finance Minister Elsa Viteri said on Monday, as the market wondered if the country was leaving open the chance of honoring that debt.

"We also declare ourselves in technical default" on the 2015 global bonds, Viteri told reporters, without explaining further.

Ecuador's default is Latin America's first on sovereign bonds in six years and caused the country's debt prices to plunge, although the region's others credits were little affected because investors doubt other governments will follow suit.

On Friday, President Rafael Correa declared Ecuador would not pay a $31 million interest payment due on Monday on the country's 2012 global bond, also dollar-denominated. A 30-day grace period expires Monday on that payment, which was initially due on Nov. 15.

Ecuador has about $10 billion in foreign debt, $3.8 billion of which is in three global dollar-denominated bonds, including the bonds maturing in 2012 , and 2030 .

On Friday, Correa said the country was defaulting on all its global bond debt and would seek a restructuring of the $3.8 billion in debt.

He cites as grounds for the default that debt was "illegal," meaning the government found irregularities in credits contracted by prior governments.

But top officials said the leftist government was still determining its move on the 2015 bond, raising the question of whether it might make the payment before its 30-day grace period starts.

Ecuador has a coupon payment -- also for $31 million -- due on Monday on the 2015s, although the government has a 30-day grace period to make the payment should it choose to.

"If the government pays the 2015 bonds, then, I think, it shows they are completely lost," said Alberto Bernal, an analysts with Bulltick Capital Markets. "It shows they are erratic."

The 2012 and 2030 bonds differ from the 2015 bonds in some respects.

The first pair was issued in 2000 in exchange for $5.6 billion in dollar-denominated bonds on which Ecuador defaulted in 1999. The 2015 bond was issued in 2005.

Another difference is in the perceived legality of the bonds, from the standpoint of an Ecuadorean debt audit commission.

The commission, which rendered its report to the president in November, said it found evidence of illegal irregularities in the 2012 and 2030 bonds. But the report did not mention the 2015 bonds.

The face value of the global bonds are $510 million for the 2012, $2.7 billion for the 2030 and $650 million of the 2015 bonds.

Ecuador plans for now to keep up payments on the rest of its foreign debt, which includes loans from multilateral banks and other countries.

Ecuadoreans scouring the country's press could be forgiven for being confused. Newspapers on Monday speculated the government would default on the 2015s or make the payment or use the grace period to decide whether to pay. (Editing by Dan Grebler)

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