By Matthew Walter
Nov. 15 (Bloomberg) -- Ecuadorean president Rafael Correa said he'll suspend payments on foreign debt he deems ``illegitimate'' should an upcoming report find there is legal basis to do so.
Ecuador will use a 30-day grace period on a $30.6 million bond payment due today to analyze its legal options, Finance Minister Maria Elsa Viteri said yesterday.
``If there's a sufficient basis to say we can't pay this illegitimate debt, that's what we'll do,'' Correa said today in his weekly address, according to a statement posted on the government's Web site. ``That the bonds fall and the country risk rises doesn't hold the least interest for us. Here we'll act for the country and the common good.''
The price on the $510 million bond maturing in 2012 plunged to as low as 14 cents on the dollar yesterday, sending yields over 100 percent, as investors braced for the first sovereign default since the global financial crisis deepened in September. Standard & Poor's cut the country's rating today to CCC-, nine levels below investment grade and three lower than its previous rating.
The decision not to make today's interest payment isn't a moratorium, since the government legally has until Dec. 15 to make the payment, Correa said. A committee will present an audit of Ecuador's foreign debt on Nov. 20, which the government will use to determine the legitimacy of its foreign debt.
``I've received a preliminary report from this commission and the results are truly horrifying,'' Correa said.
To contact the reporter on this story: Matthew Walter in Caracas at mwalter4@bloomberg.net
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