Take physic, pomp

The Ecuador Debt Commission’s final report is published

Get your copy by clicking on this link right here. If your stuck for a decent read, the 172 pages of financial Spanish on offer are sure to fascinate :-).

There’s also a press conference at 10:30am (in just over an hour’s time…Ecuador is the same time zone as New York right now) to inform on the results. Check the newswires for updates, yeah?


At the presser, debt commission head and Minister of Policy Ricardo Patiño didn’t surprise Otto in the slightest when he asked for debt holders to come forward with proposals on how to restructure or renegotiate the debt they held. Ladies and gentlemen , this was the whole reason behind Ecuador’s tactics from the very beginning. In simple terms it goes like this:

  • Bond X is at 80c on the dollar.
  • Holder holds quite happily and collects the interest ad infinitum
  • Ecuador pissed at having to pay so much
  • Ecuador scares the crap out of the market
  • Bond X goes to 20c on the dollar
  • Holder wonders if he’s ever going to see an interest payment again
  • Ecuador says, “Hey, dude…we should talk ’bout this.”
  • Holder trundles up, offers a deal, Ecuador says “too high”, makes a counter offer, holder says “too low”, they keep chatting over tea’n’buns, reach a deal.
  • Ecuador gets lower obligations, holder keeps getting interest flowing his way.
  • We all live happily ever after.

Or at least that’s how Studmuffin has it mapped out in his mind’s eye. The tough part is about to begin now. It’s likely that vulture funds have been scooping up distressed Ecuador debt (esp the 2012 and 2030 Globals) at these low 20c to 25c prices. These dudes play rough and hard and have successful track records of winning full value payouts against countries defaulting on sovereign debt (eg Peru). According to this Reuters Spanish language report, Ecuador is looking for a 60% haircut. Any final deal will be a compromise from both sides, I’d venture at this early stage.

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