Last exit to Quito

30 July 2020 By Anna Szymanski Follow @Three_Guineas

Investors are suing to halt the country’s $17.4 bln restructuring, claiming it’s hoodwinking bondholders. They have a point. Going to court is a long shot, but Ecuador’s tactics will hurt its market-friendly makeover. And it may prompt an overhaul of how countries borrow, too.

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A group of Ecuador’s creditors – including funds run by Contrarian Capital and GMO – filed a class-action lawsuit against the country in New York on July 29 in relation to halt its $17.4 billion restructuring offer that expires on July 31.

They claim Ecuador is violating securities law by making false and misleading comments in a July 27 press release and related documents. They also say the tender offer is coercive and that bondholders would suffer irreparable harm if it goes through because they will either have to agree to what they call unfavorable terms or receive less favorable treatment as a non-tendering bondholder.

On July 13, a steering committee representing dissenting creditors urged the government to improve its tentative terms and proposed its own terms.

On July 20, Ecuador released its official exchange offer, and creditors who said they held over 53% of Ecuador’s total outstanding sovereign bonds and around 50% of almost every individual bond series said that they supported the deal.

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