(Adds pricing, order book)
By Davide Scigliuzzo
NEW YORK, Dec 8 (IFR) - Ecuador returned to the US dollar
bond market Thursday for the third time this year, raising
US$750m through a new 10-year note following a recent rally in
The country priced the new issue at par to yield 9.65%,
which was well inside initial price thoughts of low 10% area,
according to market sources.
The deal, rated B by S&P and Fitch, will provide much needed
funds for the oil-exporting nation, which plunged into recession
One portfolio manager said the yield initially offered -
which was well above the 9.1% at which the country's 2022s were
trading - was justified by Ecuador's weak fundamentals and
"They have got to be willing to pay quite a lot," he told
IFR soon after the deal was announced.
"This is a country that has gone into recession, issued more
than they said they would and ... is going to have a significant
budget deficit (this year)."
Strong demand from investors, who placed around US$2.4bn in
orders for the trade, allowed sole lead manager Citigroup to
aggressively tighten yield to final guidance of 9.75% plus or
minus 10bp, pricing at the tight end.
Ecuador has already raised US$2bn in the US bond market this
year. It sold a US$1bn 10.75% 2022 bond in July, which it tapped
again in September for another US$1bn.
Higher crude prices have helped reduce Ecuador's financing
costs in recent months, with the spread on its 2022s tightening
to 740bp over Treasuries on Thursday from around 960bp at the
end of July.
But investors are also keeping a cautious eye on the
nation's political developments.
"The bounce in oil helped, but we have got elections next
year and you have got pretty binary outcomes depending on the
winner," said Kevin Daly, a portfolio manager at Aberdeen Asset
He said that a victory by Lenin Moreno, an ally of leftist
President Rafael Correa, would likely see Ecuador remain
dependent on financial markets for funding, while a victory for
the opposition could lead to market-friendly reforms and a deal
with the International Monetary Fund.
After repudiating some of its debt in 2008, Ecuador worked
to repair relations with investors and made a landmark return to
the international bond markets in 2014. It has since issued
bonds with maturities as long as 2024.
Last month, rating agency Moody's affirmed Ecuador's B3
rating, saying it expects subdued GDP growth, a gradual decline
in fiscal deficits and a steady balance of payments.
(Reporting by Davide Scigliuzzo; Editing by Shankar
Ramakrishnan, Marc Carnegie and Natalie Harrison)