Sunday, May 28, 2023

Dentos advises Ecuador on world’s largest debt-for-nature swap to date

A Dentons cross-border team has advised Ecuador government on the world's largest debt-for-nature swap to date, by Credit Suisse International for $656 million, maturing in 2041, aimed at the conservation of the Galapagos Islands and their marine ecosystems


According to Reuters, Ecuador sealed the world’s largest “debt-for-nature” swap on record on Tuesday, selling a new “blue bond” that will funnel at least $12 million a year into the conservation of the Galapagos Islands, one of the world’s most precious ecosystems.

Having bought back roughly $1.6 billion of the country’s debt at a near 60% discount late last week with the help of Credit Suisse, Ecuadorean Foreign Minister Gustavo Manrique Miranda said biodiversity was now a valuable “currency”.

The transaction involved the conversion of Ecuador’s sovereign debt consisting of progressively increasing floating rate notes issued by Ecuador maturing in 2030, 2035 and 2040 into a new loan issued by Credit Suisse International for $656 million, maturing in 2041.

Under the debt swap, Ecuador, as borrower, entered into a fixed-rate term financing transaction with GPS Blue Financing Designated Activity Company (GPS Blue), as lender, and The Bank of New York Mellon (BNYM), as funding agent.

The loan is also backed by a partial credit guarantee of $85 million from the Inter-American Development Bank (IDB), as well as a political risk insurance policy (PRI policy) issued by the US Development Finance Corporation (DFC), the largest political risk insurance policy issued by DFC to date.

As a central element of the operation, the Andean Ministry commits to meet certain sustainability commitments no later than the compliance deadlines agreed between the parties. These sustainability commitments relate to the management and conservation of the marine reserve surrounding Galapagos and the growth of the natural capital of the Islands and their marine ecosystems.

Jesús Mardomingo, partner in the Banking and Finance practice of the Spanish office, led both Dentons’ multi-jurisdictional team and the specialist Environmental, Social and Governance (ESG) team in advising on this landmark transaction. Lola Noguera, an associate in the Madrid Banking and Finance practice, was also an integral part of the core team.

Partners and associates from various practice areas (Sovereign Practice, Banking and Finance, Environmental and Natural Resources, ESG and Sustainable Finance, and Capital Markets) from different offices of the international firm, such as Paris, Toronto, Prague, London, New York and Washington DC participated alongside them.

Lazard has acted as financial advisor to the Ministry of Economy and Finance of the Republic of Ecuador.

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