-- [B] Repeats: Details of Ecuador bond exchange offer emerge -- --Ecuador must do exchange if 85% bondholders agree: source --Ecuador deal includes cash for missed payments with interest --Ecuador bond deal based on 11.25% discount rate, source says --Ecuador restructuring based on Libor +475 bps discount rate --Ecuador 30-yr bonds can swap to 12-yr with extra 35% haircut By Felix Salmon, BridgeNews London--July 27--In a move sure to prove controversial, Ecuador has retained the right to go ahead with its bond exchange offer even if it receives approval from less than 85% of its bondholders, market participants told BridgeNews Thursday. The country will also not reimburse its Par and Discount bond holders their interest collateral beyond paying the missed coupon payments. * * * The exchange deal is structured so that all market participants are treated equally. That means that the same discount rate--11.25% on the fixed-rate bonds, and 475 basis points over Libor on the floating-rate bonds--has been applied to the sovereign component of all Ecuador's outstanding bonds. The haircut, or amount that the principal amount will decrease, therefore alters from bond to bond, according to its structure. Ecuador has just over $3 billion in collateralized Par and Discount bonds outstanding, and under the terms of the exchange offer, Par and Discount bondholders who tender their bonds will receive cash equivalent to the present value of the zero-coupon Treasury bonds guaranteeing the bonds' principal--the so-called Treasury strip. However, if fewer than 85% of bondholders accept the exchange, those Par and Discount bondholders who tendered their bonds will receive the strip discounted by a further 60 basis points. All bondholders will receive all missed coupon payments, with interest, in cash. The Par and Discount bondholders, however, will not receive any extra cash to reimburse them for the fact that their bonds contained a rolling interest guarantee. All of Ecuador's outstanding Brady and eurobonds--the Pars, Discounts, PDIs, IEBs, 2002s and 2004s--will be exchangeable for a new 2030 step-up eurobond, whose 4% coupon will increase by one percentage point per year until it reaches a maximum of 10%. Bondholders will then have the option of exchanging their 2030 bonds for a new 2012 eurobond, with a plain-vanilla 12% coupon, if they accept a further 35% haircut on their holdings. That is, bondholders will be able to receive 65 of the new 2012 bonds for every 100 of the 2030 bonds they hold. Bondholders will also receive the new 2012 bond in lieu of any interest accrued on their Brady or eurobonds since the last coupon payment was due. End (Back) to felixsalmon.com