A colleague of mine, Marius Zaharia (@MZaharia) interviewed Moritz Kraemer, Standard and Poor’s head of sovereign ratings for Europe, Middle East and Africa. (you can read the interview here) Kraemer offered this piece of advice to the African governments who are busily tapping bond markets these days:
What I want to tell all those governments in africa is that you are not a successful market participant when you’ve issued your first eurobond. You are a successful participant when you’ve paid it back for the first time.
A sound piece of advice. But where does that leave Ecuador which has a frequent history of default spanning three centuries? One might argue in fact Ecuador’s market strategy has been highly successful — not only has it avoided repaying creditors, it also seems adept at persuading them to part with more cash at regular intervals.
It did just that a few weeks ago, raising $2 billion at a sub-8 percent yield just six years after President Rafael Correa (still in office today) repudiated $3.2 billion in bonds issued by a prior government. And what’s more, Quito said this week it could come back to the market soon to borrow more.
Chances are this too will be successful. Investors submitted bids worth $5 billion for the June bond which was initially billed as a $700 million issue. Many were lured by Ecuador’s fairly low public debt ratios (partly a result of past defaults) and a relatively high yield. It has also been making the right noises of late, having opened talks with holdouts from its 2009 restructuring and inviting reviews by the IMF and World Bank.