Ecuador sews up debt-for-nature swap

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Ecuador said it took out a $1 billion loan to repurchase a portion of its international debt as part of a deal that is expected to free up $800 million for Amazon conservation projects and other government outlays.

The loan has a tenor of 17 years and charges interest of 6.034%, Slav Gatchev, managing director of sustainable debt at The Nature Conservancy (TNC), told LatinFinance.

The US-based nonprofit coordinated the swap deal, under which the proceeds of a $1 billion bond sale were repackaged into a loan, which the Ecuadorean government used to repurchase more expensive debt.

Ecuador intends to use $460 million of the total expected savings for the conservation of terrestrial and freshwater ecosystems in the country’s Amazon region. The remaining funds will be used to support budgetary spending and other priorities, according to Gatchev.

“This is the first ever land-based nature bonds program effort for TNC and our largest to date,” the nonprofit said Monday in a release.

HEAVY DISCOUNT

The Ecuadorian government used the loan proceeds to repurchase at a discount step-up bonds maturing between 2030 and 2040. The notes had a face value of $1.5 billion.

The US International Development Finance Corporation provided a $1 billion political risk insurance on the financing, while the Inter-American Development Bank provided a partial guarantee of $155 million, TNC said.

Bank of America acted as the sole arranger, bookrunner, coordinator and initial purchaser of the bonds, the nonprofit added.

In Ecuador’s first such transaction last year, the government swapped $1.63 billion worth of bonds for a $656 million loan from Credit Suisse as part of deal to finance long-term marine conservation projects in the Galápagos Islands.

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