Ecuador Told To Repay $1.4B Debt
NEW YORK (AP) _ Creditors on Friday rejected Ecuador’s pleas for more time to renegotiate $6 billion in U.S.-guaranteed ``Brady bonds″ and demanded immediate repayment of $1.4 billion of its debt.
Ecuador defaulted on the bonds Thursday, missing a $44.5 million interest payment.
The ``Brady bonds″, named after former U.S. Treasury Secretary Nicholas Brady, were issued in 1994 to restructure bad loans resulting from the Latin American debt crisis of the 1980s. They are partly backed by U.S. Treasury securities.
Though other nations have restructured their payments, Ecuador became the first to default.
The vote by investors Friday gave impatient bondholders a ``clear mandate″ to accelerate the repayment schedule, according to Andy Tuck, spokesman for Chase Manhattan Corp., which is the agent for creditors.
Bondholders know the cash-strapped South American country doesn’t have the money to repay the first phase of $1.4 billion discount bonds. But they didn’t want to go along with Ecuador’s plan for renegotiating its payments out of fear of setting a precedent for other countries that owe billions in Brady bonds.
The repayment demand Friday is likely to lead to defaults on the other Brady bonds, meaning Ecuador could soon end up owing the full $6 billion.
The problem of restructuring is complicated because no individual or institutional investor holds a majority of Ecuador’s Brady bonds, and there appeared to be no coordinated group for Ecuadorian officials to negotiate with.
Ecuador’s president, Jamil Mahuad, said Thursday his government had signed a letter of intent with the International Monetary Fund for a $400 million loan that could lead to $1.3 billion in overall international aid.
IMF officials urged Ecuador to develop a new economic strategy and reach a comprehensive accord with creditors before receiving the IMF loan. The deal hinges on Ecuador passing austerity measures and tax increases that most lawmakers there oppose.
Ecuador’s total public debt is $13 billion and is expected to top 117 percent of the country’s gross domestic product by the end of the year.