Hogan Lovells, Cleary Gottlieb Advise on Consents to Amend $19 Billion in Ecuador Debt

Hogan Lovells and Cleary Gottlieb Steen & Hamilton aided the Republic of Ecuador on its solicitation of consents to amend approximately $19 billion in securities in order to afford the country a temporary deferral on debt payments while it struggles with the new coronavirus.

Hogan Lovells represented Ecuador, while Cleary Gottlieb is acted as counsel to solicitation agent Citibank.

The devastating arrival of COVID-19 has mounted pressure on the Andean country to divert scarce financial resources toward fighting the outbreak. At the same time, demand for Ecuador’s oil—which accounts for about a third of public sector revenue—has plummeted as global economic activity has slowed during the pandemic.

The amendments went into effect with the approval of more than 82% of note holders for each series of securities under consideration.

The firm also represented Ecuador’s wholly owned energy company Empresa Pública de Exploración y Explotación de Hidrocarburos Petroamazonas EP on consents to amend approximately $175 million in securities.

The amendments have provided “short-term relief” from financial obligations, Hogan Lovells said, while the Republic of Ecuador implements steps to improve public finances and meet outstanding debt obligations.

Investors in 10 different bonds have agreed to defer approximately $800 million in upcoming interest payments until August.

Multiple partners at Hogan Lovells joined the effort: New York capital markets partner Evan Koster, Houston-based Latin America practice group co-head Bruno Ciuffetelli, Miami-based finance partner Gaston Fernandez, Latin America practice co-head José Valdivia in Miami, and U.S. business restructuring and insolvency co-head Ron Silverman in New York.

Cleary counsel to Citibank included partners Andres de la Cruz, Juan Giraldez and Manuel Silva.

Perkins Coie partners Sean Connery and Lincoln Finkenberg acted as counsel for the trustee.

Ecuador has defaulted on multiple global bonds since debuting in the international markets in 1997, and the country faced social turmoil and deteriorating economics even before the health crisis.

Fitch Ratings cut the country’s credit rating April 20 to Restricted Default, indicating that it expects a restructuring. That likely means more work for lawyers down the road.

Fitch described Ecuador’s liquidity position as “exceptionally tight,” adding that “social and political pressure for relief from external debt service to attend to the domestic crisis has grown considerably.”