S&P Global Ratings upgraded Ecuador's long- and short-term foreign- and local-currency sovereign credit ratings to B-/B from selective default, with a stable outlook, following the completion of the country's distressed debt exchange Aug. 31.

"Participation in the exchange was high, above 95%, sufficient to trigger the collective action clauses provided in the old bond indentures to avoid future holdout litigation," S&P Global Ratings said.

Ecuador restructured around $17.4 billion of foreign public debt, which is expected to reduce the country's gross financing needs by about $1.4 billion in 2020 and by about $6.6 billion between 2021 and 2023.

The ratings action reflects the country's more manageable debt service. The agency also expects that government reforms to support fiscal and financial stability will continue.

The rating agency assigned a B- rating to Ecuador's US$16.5 billion in new debt issued in three bonds.

S&P Global Ratings expects Ecuador's GDP to contract by about 10% in 2020, due to the coronavirus pandemic and the oil price shock, and marginally recover in 2021.

The country's fiscal deficit is projected to reach 8% of GDP and its net general debt is estimated to climb to 58% of GDP this year.

"While very high financing needs appear to be mostly covered for 2020, those for 2021 could be more challenging and depend on improved fiscal outturn amid some economic recovery," the rating agency added.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings. Descriptions in this news article were not prepared by S&P Global Ratings.