June 10, 2019 / 3:01 PM / 2 months ago

UPDATE 1-Ecuador to buy back 2020 bond through issuance of new debt

(Adds details, quote from finance minister)

QUITO, June 10 (Reuters) - Ecuador will launch an offer to buy back its 2020 bond in an operation that will be financed with the issuance of a new bond maturing in 2029, the country’s finance ministry said in a statement on Monday.

Ecuador, OPEC’s smallest member, is struggling with tight liquidity amid a fiscal deficit that stood at 3 percent of GDP at the end of last year and a hefty foreign debt load.

The Andean country in March reached a $4.2 billion deal with the International Monetary Fund allowing it to receive an immediate disbursement of $652 million, opening the door for it to receive an additional $6 billion in loans from other multilateral institutions.

Issuing new debt due in 2029 to finance the repurchase of the March 2020 bond would shift into the future the $1.5 billion bill for the paper that otherwise would have come due next year.

The looming payment “is generating expectations on the international market about the country’s finances and international reserves,” the Finance Ministry said in a statement.

“That Ecuador has the capacity to launch this operation on the capital market is good news, it is a sign of the confidence that the world currently has in Ecuador and in the economic policy of the government,” Finance Minister Richard Martinez said in the statement.

The liability management operation, organized with the help of Citigroup, Deutsche Bank and JP Morgan, may also reduce the average cost of the 2029 bonds and eventually the debt owed on them, the statement added.

Ecuador’s debt grew under former leftist President Rafael Correa, who endorsed current President Lenin Moreno in the 2017 election but has since become a critic of his successor’s turn toward market-friendly economic policies.

Skepticism of the IMF runs strong in Ecuador and throughout Latin America, where many blame Fund-imposed austerity policies for economic hardship. (Reporting by Alexandra Valencia, writing by Julia Symmes Cobb and Brian Ellsworth Editing by Chizu Nomiyama and Dan Grebler)

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