by Mariana Santibanez and Alvaro Ledgard

Ecuador is planning to issue a new Blue Bond to finance the repurchase of some of its outstanding bonds, according to two sources close to the potential deal.

A Blue Bond is a debt instrument used to finance marine and ocean-based projects.

The country launched a tender for its 2030, 2035 and 2040 notes 26 April, which expires on 4 May and is managed by Credit Suisse.

The new Blue Bond is expected to be similar to the one presented in a bill by Belize’s House of Representatives in October 2021, according to one of the sources close.  

The sources did not elaborate on the timing or size of the new bond. The debt repurchases could be up to USD 800m, according to the announcement.

Debtwire reported in November that the idea of an Ecuador Blue Bond was well received by the market, as the operation would reduce debt service over the next several years. However, the political situation in the country has deteriorated since, due to an ongoing impeachment procedure against President Guillermo Lasso, which prompted two sovereign credit analysts to question the transaction's timing.

“I am stunned, this is the worst time,” the first sovereign analyst said about the potential transaction. “They are in the middle of impeachment proceedings, so I guess that from a government perspective they are trying to instill confidence that they are going to stay.”

“The timing is unusual, but this is something that takes many months to prepare so I guess it was just coincidence to what is now very high political risk in Ecuador,” the second sovereign analyst said.

A representative from Ecuador's finance ministry declined to comment.