Anatomy of Ecuador Sovereign Debt Exchange Transaction

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Ecuador – 2000 Sovereign Debt Exchange Transaction Anatomy

In order to include Distressed Sovereign Restructured Debt as an asset sub-class within ActiveAllocator we examined the past 30 sovereign default crisis with 270 bonds in multiple emerging markets including Argentine, Bulgaria, Colombia, Ecuador, Iraq, Mexico, Nigeria, Panama, Peru, Philippines, South Africa, Turkey, Ukraine,  Venezuela etc. Given the large variation of returns between crisis episodes, aggregating statistics from these events is a spurious exercise; the sample size is much too small, restructurings idiosyncratic, haircuts and losses vary widely as well as heterogeneous debt security-level characteristics.

Our approach is to parse the anatomy of each restructured deal – restructuring defined as a distressed debt exchange in which creditors receive instruments with less-favorable terms than the original issues -beginning with an examination of the original debt offer documents as well as the specifics of each deal.

Wall Street Journal, July 18, 2020 “ Funds Clash Over Deal on Ecuador “

To swap $18 billion bonds into new that pay lower interest with delayed maturity. Restructuring debt proposals create creditor – including Ashmore Group, BlackRock, T. Rowe Price, Contrarian Capital – differences in how different bonds are to be treated. New transactions being asked to linked to ESG goals.

  • Ecuador seeking to restructure debt during coronacrisis, and lower oil prices given new liquidity and debt sustainability challenges
  • Oil dependent economy heavily reliant on external credit where external interest payments are 10% of current external receipts
  • For history of Ecuador Debt Restructuring we recommend: Feibelman, A. (2017). Ecuador’s 2008–2009 Debt Restructuring. In J. Bohoslavsky & K. Raffer (Eds.), Sovereign Debt Crises: What Have We Learned? (pp. 48-64). Cambridge: Cambridge University Press. doi:10.1017/9781108227001.004
  • We examine here the  anatomy of  Ecuador Debt Exchange Transactions — 2000 , the first instance of default in Brady Bonds

Author: Sameer_Jain

Partner. Sameer Jain is founder of FinTech, the world’s first portal that seamlessly integrates traditional, illiquid and alternative investments within portfolios. Prior to this he was Chief Economist & Managing Director at AR Capital. Before that he headed Investment Content & Strategy at UBS Alternative Investments. At UBS, he served as a non-voting member of the Wealth Management Research investment committee, and as a capital allocator was responsible for all illiquid investing including fund manager selection and due diligence across the platform. Prior to UBS he headed product development & investment research at Citigroup Alternative Investments that managed over $75 billion of alternative investments across hedge funds, managed futures, private equity, credit structures, infrastructure and real estate. Here he led a team that developed proprietary models for portfolio strategy and asset allocation with alternative investments, provided investment support and research to pension plans, sovereign wealth funds, endowments as well as internal clients including Citi Private Bank. Before this he was with Cambridge Alternative Investments and SunGard (System Access) where he travelled to over 80 countries for work across Europe, Asia, Middle-East and Africa. He has written over 30 academic and practitioner articles on alternative investments with thousands of downloads at SSRN, presented at over a hundred industry conferences and has coauthored a book, Active Equity Management. Mr. Jain has multiple degrees in engineering, management, public administration and policy and is a graduate of Massachusetts Institute of Technology and Harvard University. He is a recipient of the Alfred Sloan Fellowship and subsequently was a Fellow of Public Policy and Management at the Harvard Kennedy School of Government for a year. He holds Series 7 and 66 securities licenses.

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