ECUADOR PLEADS WITH ANGRY BANKERS; LITTLE PROGRESS SEEN
By Mary Tobin
WASHINGTON (MktNews) - The Ecuadorans are talking to creditors, "trying to make a good case" for its decision to effectively default on its Brady Plan but they haven't been very convincing, a banker who is serving on the Brady negotiating committee said Tuesday after an initial meeting.
"Oil prices are up as well as other commodities; they have multilateral help," the banker said. "They do have serious problems, and could have received a better reception if they had presented it differently. As it stands, the plan discriminates against some bondholders and the ones who are on the short end are pretty angry."
Ecuador said it would pay its past-due interest bonds (PDIs), ask holders of discount bonds to take their collateral (25% of par), and would negotiate the other bonds with creditors.
The bankers at the International Monetary Fund meeting said that, unlike the bank debt negotiations of the 1980s, there will be no easy way to put together a committee representing bondholders, or even to find out who the bondholders are.
It has been the official mantra that Ecuador's action will not spread to other Latin American countries and indeed it hasn't despite some pessimism that a country might be tempted if times get bad enough. "Let's just hope for the best," the banker, who also served on such many committees in the 1980s string of debt crises, said.
Ecuadoran officials did meet with bondholders in Washington Monday night and it was not a happy session, according to the banker participant who asked that his name not be used. "First there was denial, then there was anger, then there was frustration," said a banker who attended. Even today, he said, in talking to representatives, "I don't sense a lot of sympathy."
Ecuador officials are taking their road show to New York and other financial centers in the next few days.
Before Ecuador can climb out of its debt morass, it will have to come to grips with its failed banking system, the banker said. The government has consolidated banks and guaranteed deposits, which it must fund. "They don't have a clear policy for dealing with it," the banker said. "Until they do, it will hard to come up with a plan that will appease bondholders."
Ecuador's president Sunday night, in an address to his nation that was broadcast to an international group of reporters at Ecuador's embassy in Washington, asked creditors for "a little air," and said that without a structured reduction in its debt, it would have to unambiguously default. |
