Arming for an Ecuador Default
Bondholders should lawyer up, locate the assets and consider a pre-emptive strike against Ecuador in the run up to default. The sovereign is steeling itself for a legal fight. by Kenneth S. Levine*
US litigation from the Argentina default and from many other
nations has left a favorable path of legal precedents that
Ecuador's bondholders could follow to recover their
investments. It also provides guidance for what bondholders
should be doing now to prepare for what appears to be an
In January 2007, Rafael Correa took over as president of
Ecuador, and vowed to default on the country's "illegitimate"
foreign debt, which currently stands at over $10 billion. On
February 15, the president faced his first test a $135
million bond interest payment but backed down at the
last minute and paid on time. Correa's government has also said
it will make a May interest payment, but it is making no
promises for the long term. Analysts predict Ecuador will
default within the next year.
If this happens, Ecuador will follow in the footsteps of a
Already have an account?
Subscribe now for unlimited access to all current and archive news, data and market analysis.
Take a free two-week trial now for the latest news, data and market analysis.