Studmuffin obviously didn't sell enough advertising space for tomorrow's show........

........so by way of spite he's going to make his declaration on the debt payment in precisely 10 minutes' time, at 2pm local time in Quito. Here's Reuters to confirm that I'm not fibbing.

I'll be updating this post later. A roll on the drums, please........................................

UPDATE: Well guess what? I was wrong, and President Studmuffin is taking his country into default. Here's Bloomberg's version:

By Stephan Kueffner Dec. 12 (Bloomberg) -- Ecuador won’t make a $30.6 million bond interest payment due next week, putting the South American country in default for a second time in a decade, President Rafael Correa said.

“The country is in default,” Correa told reporters in his office in Guayaquil. Correa, calling the debt “illegal” and “illegitimate,” said the government will present a restructuring proposal to bondholders in coming days. “We want creditors to recoup part of their money.”

The country’s bonds plunged to under 25 cents on the dollar yadayada continues here

As a little mitigation, I point out that the advice was to take half profits today at the 31c prices offered, but that doesn't disguise the fact that this sucks.

As more mitigation, he's clearly aiming to get a deal done here and he's not saying "we ain't gonna pay never never", but doesn't disguise the fact that this sucks, either.

As the last little droplet of mitigation the call to buy Ecuador paper was made when it stood at 21c and 22c, so it's still a win. But hell, this still sucks.

Bonds have dropped from those 31.5c levels yesterday to 25c now, and Elliott Associates are sharpening their knives as we speak. Mark Weisbrot got the call right this week. Good shot, sir.

More on this later. Meanwhile he's the proof that I was dead wrong on this call. Having opinions is a real burden sometimes.

Ecuador bonds: the build up to Saturday

The professional arm-wrestling circuit reaches Paraguay

Here we go with the rumour-mill that presages Saturday's big final announcement from Studmuffin on whether Ecuador is going to pay the nasty coupon on their nasty illegal debt.

This morning El Comercio reported that Ecuador has bought back $680m of its own bonds, its source being....errr.....someone. The idea is that the bonds are dirt cheap right now and they can retire their own debt for relative peanuts. This was one of the original conspiracy theories about the whole thing, if you can remember back that far. Here's Bloomie on the story:

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Ecuador Bought Back $680 Million of Bonds, El Comercio Reports

By Stephan Kueffner

Dec. 11 (Bloomberg) -- Ecuador has bought back $680 million of its debt through a state-owned bank, Quito-based newspaper El Comercio reported, without identifying the source of the information.

State-owned Banco del Pacifico managed the debt repurchases after the government skipped a $30.6 million interest payment on Nov. 15, invoking a 30-day grace period, the newspaper reported.

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Remember scandalfans, Saturday December 13th is the big Muffin annoucement day during his weekly live radio/TV show. Be there or be square.

Ecuador debt: "honestly...we're not kidding you know..."

Now is it just me.............?

Today Ecuador's FinMin Viteri held a presser to tell the world (translation Otto):

"If we have to reach default, we will do it responsibly. The national government does not recognize the illegal and illegitimate debt at all. Ladies and gentlemen, we are not playing; we are very serious and conclusive when saying "The national government rejects the illegal and therefore illegitimate debt."

Spooky huh? WHoooooOOOOoooooOOOOOoooooOOOOOO. Just the kind of thing Andres Oppenheimer can report on tomorrow while trying to forget what an idiot he's made of himself recently. Here's the Reuters version in English too...spookier and spookier... whooOOOoooOOOooo

So interesting that Brazil's main international advisor to President Lula, Marco Aurelio Garcia also said today, "Ecuador is going to pay its bill...we (Brazil) have the means with which to convince (them)."

Also interesting the way the Veep of the debt commission last week admitted that Ecuador will have to pay for the time being. There's no other way to take the complaint forward and maintain the "responsible" position. Right now Ecuador has two firms of US lawyers working on the same thing...betcha a dollar they advise Studmuffin&Co to keep paying the coupons while making an international case of it all. Nah...betcha ten dollars, in fact. Any takers?

Also interesting is the little snippet that Stephan Kueffner of bloomie picked up on. It's buried under the dramatic headline, but Bloomie does manage to mention that Ecuador quietly and without much fuss paid a U$1.2m coupon on one of its Brady bonds this week. The reason why it paid? To stay legal and responsible.

But most interesting is the action where it really counts, namely the bonds market. The key 2012 Globals sank to 21c on the dollar when the whole shebang first started. This time last week they were trading at 25.5c and 26c on the dollar. Today the same bonds closed the day at 31.5c on the dollar having touched 32c after (not before) Viteri spoke. That's a 50% climb since the drama began, and 20+% in the last couple of days. Money talks and BS walks, dudes and dudettes.

Speaking of BS, the whole thing comes to its inevitable climax on Saturday December 13th. That's the day Studmuffin has chosen to reveal to the world whether Ecuador is going to pay the delayed coupon, the announcement coming as part of the Studtastic* Roadshow to be transmitted on Radio MUFN. The guy must be after the ratings...hey, I wonder how much a 10 second slot to advertise this blog would set me back?
Finally, a word for those of you who've taken this blog's advice on Ecuador debt throughout this soap opera: So far you're making good coin but think about the retreat position that the idiots who called end-of-the-world over Ecuador's bonds will take. When Ecuador pays the coupon on Monday 15th, you can bet your sweet bippy you'll hear resounding cries of, "Well, they paid this time, but the issue isn't going away and the next round of coupons is steeper and you'll see you'll see I'm right y'know even though i'm wrong...." blah blah yada yadaaaaa ad infinitum.

The point here is that selling the news is a likely scenario as the pea-brained shills will still be preaching a sermon to people who want them to be right, thus maybe profit-taking on half your position on Friday 12th December is the prudent course. Biz iz biz.

*copyright DJ, used with kind permission

Ecuador and Brazil rock them gently to sleep

It's like watching a movie; you know it's fiction but you suspend disbelief and get carried along by the story. Follow the bouncing ball, dudettes and dudes:

• Studmuffin receives the illegitimate debt report from the CAIC commission in late September. To quote the commission Veep from Tuesday, "It is not that the President does not know the report, because it was delivered at the end of September as was our commitment."

• On September 30th, he meets Lula in Manaus as part of the Lula/Chávez/Evo/Correa summit. The afternoon is set aside for private consultations between Lula and Studmuffin.

• Five weeks later, Studmuffin puts the international finance community on the hook for the $3.9Bn or so in illegitimate bonds (i.e. the Globals 2012, 2015 and 2030).

• But he starts the ball rolling by saying "definitely won't pay the $320m in Brazilian BNDES bonds."

• All the while saying, "We're willing to negotiate, of course".

So today Brazil recalls its ambassador to Ecuador for consultations, and suitably grave noises come from Brazilian functionaries.

ARE YOU TELLING ME THAT LULA DIDN'T KNOW WHAT CORREA WAS PLANNING TO DO? Gimme a break!

Otto bets $5 on the following: Brazil is being used as a lead precedent in the bonds negotiations. In the next few days we'll witness huffing and puffing from both sides, with gleeful media writing stories about how the Socialist axis has broken and how Correa has gone too far. Then the two sides sit down and spend hours thrashing out a deal (that's already been planned). Once the little charade is over, Correa looks the BIG bondholders in the eye and says "wanna come talk, too?". Thus meekly they walk in, they have their own little trasharound and a deal is struck (at some kind of haircut or reduced interest payment or combo or variation thereof).

Any takers? What odds will you give me for this scenario, sportsfans?

The Ecuador Debt Commission's final report is published

Get your copy by clicking on this link right here. If your stuck for a decent read, the 172 pages of financial Spanish on offer are sure to fascinate :-).

There's also a press conference at 10:30am (in just over an hour's time...Ecuador is the same time zone as New York right now) to inform on the results. Check the newswires for updates, yeah?

UPDATE: WHAT AM I BID?

At the presser, debt commission head and Minister of Policy Ricardo Patiño didn't surprise Otto in the slightest when he asked for debt holders to come forward with proposals on how to restructure or renegotiate the debt they held. Ladies and gentlemen , this was the whole reason behind Ecuador's tactics from the very beginning. In simple terms it goes like this:

• Bond X is at 80c on the dollar.

• Holder holds quite happily and collects the interest ad infinitum

• Ecuador pissed at having to pay so much
  

• Ecuador scares the crap out of the market

• Bond X goes to 20c on the dollar

• Holder wonders if he's ever going to see an interest payment again

• Ecuador says, "Hey, dude...we should talk 'bout this."

• Holder trundles up, offers a deal, Ecuador says "too high", makes a counter offer, holder says "too low", they keep chatting over tea'n'buns, reach a deal.

• Ecuador gets lower obligations, holder keeps getting interest flowing his way.

• We all live happily ever after.

Or at least that's how Studmuffin has it mapped out in his mind's eye. The tough part is about to begin now. It's likely that vulture funds have been scooping up distressed Ecuador debt (esp the 2012 and 2030 Globals) at these low 20c to 25c prices. These dudes play rough and hard and have successful track records of winning full value payouts against countries defaulting on sovereign debt (eg Peru). According to this Reuters Spanish language report, Ecuador is looking for a 60% haircut. Any final deal will be a compromise from both sides, I'd venture at this early stage.

Ecuador bonds: The Audit Commission of Public Credit Presentation

It's that man again!

As those following the Ecuador bonds soap opera know, on Thursday 20th November the big bad audit report is being made public by Ecuador. The people who were asked to do the investigation are the "Comisión de Auditoría de Crédito Público" (Audit Commission of Public Credit) and said comission handed in their recommendations to President Correa in September. This was pointed out today in this report in Ecuador Inmediato (subscription site, but free to join). Franklin Canelos, the Veep of the commission, confirmed in an interview with Radio Quito today that:

"On Thursday the Commission's Report will be made public. It is not that the President does not know the report, because it was delivered at the end of September as was our commitment."

Now as you know, your humble Otto loves you as if you were his own children. And so on the next three links is the confidential powerpoint presentation that the audit commission handed over to President Correa back in September (along with the full written report). Be warned that;

• These are three meaty downloads that total up to over six mega of memory space.

• They are in Spanish, and technical financial Spanish at that.

• There are lots of charts, tables and dense information on the pages and it's assumed you understand at least the basics on how bonds work.

All that said, the three PPT files that constitute this report are extremely interesting reading (and that's putting it mildly) if you have skin in the EM bonds sector.

This is part one, that concentrates on the multilateral debt

This is part two, that concentrates on the Global/Commercial debt (this includes the Global 2012 and 2030 paper and is perhaps the most pressing information at the moment, though I must stress that all three parts are important)

This is part three, that looks closely at the bilateral debt and the Paris Club

So help yourself, download the information and read all about it a full day before the rest of the world. I hope your Spanish is up to scratch (mine is :-). Remember where you heard it first, people. And before you ask, I'm not telling you from where these came.