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Republic of Ecuador Completes First-of-its-Kind International Restructuring


Republic of Ecuador Completes First-of-its-Kind International Restructuring

Global law firm Hogan Lovells represented the Republic of Ecuador in one of the first-ever tests of “collective action clauses” in capital markets transactions, helping the country complete one of the largest international restructurings. The country, a long-time client of the firm, has faced the crippling effects of the coronavirus outbreak and historically low oil prices.

The firm put together a team comprised of lawyers from its Capital Markets, IERP, BRI, LAE, and Government Relations practices from several locations including New York, Miami, Houston, London, Mexico City, and Washington, D.C. to collaborate on the landmark restructuring of its US$17.4 billion of international bonds.

The transaction involved exchanging 10 existing international bonds maturing between 2022 and 2030 for three new bonds due in 2030, 2035 and 2040. Under the terms of the new bonds, interest payments will resume at the beginning of next year, while the earliest principal comes due in January 2026, a significant reduction in Ecuador’s debt burden.

The Hogan Lovells team worked on many unique aspects of the transaction, including structuring one of the first applications of collective action clauses in sovereign bond restructurings. Collective action clauses have been primarily used in the debt markets to allow a supermajority of bondholders to agree to a debt restructuring that is legally binding on all holders of the bond, including those who vote against the restructuring. Along with the use of this mechanism, this deal was one of the largest international restructurings due to the coronavirus.

The restructuring also faced many challenges, not the least of which was an action for a temporary restraining order and preliminary injunction filed by two creditor funds in the Southern District Court of New York where the firm’s LAE team, on short notice, won a victory when the judge denied the request from the bench. Hogan Lovells also was actively involved in the restructuring of Ecuador’s bilateral debt and derivatives, including the reprofiling of its debt with China and made sure the restructuring complied with a stringent set of policies and guidelines from the International Monetary Fund.

The Hogan Lovells Capital Markets team was led by partner Evan Koster, with the assistance of counsel David Tyler, senior associates Adam Lapidus and Philip Schuster and associate Juan Moreno, all from the New York office. The IERP team was led by Houston partner Bruno Ciuffetelli with the assistance of Chief Legal Officer and Miami partner Jose Valdivia, and Miami partner Gaston Fernandez; partner Philip Robb and counsel Nick Tidnam from London; International Energy advisor Pedro Martinez from the Miami office; senior associate Dana Turjman from the Miami office; and senior associate Victor Barrientos from the Mexico City office.

The BRI team was led by U.S. BRI co-head Ron Silverman with the assistance of counsel Philip Ehrlich, both from the New York office. The LAE team was led by New York partner Dennis Tracey with the assistance of New York partners, Michael Hefter and Seth Cohen; London partner Kieron O’Callaghan and London counsels Hannah Piper and Jerome Finnis; and New York associates Austin Gassen, Julia Grabowska, and Jonathan Wieder. Lastly, the Government Relations and Public Affairs was led by partner Ivan Zapien in Washington, D.C.