Leading global law firm, Baker McKenzie, has acted for Oceans Finance Company, in its role as project manager to structure, implement and oversee the Government of Ecuador’s record $1.6 billion debt-for-nature swap. The transaction will provide over $300 million for independently managed marine conservation around the Galápagos Islands over the next 18 years.
Through this transaction, the largest debt conversion for marine conservation to date, Ecuador’s existing sovereign bonds with a face value of over $1.6 billion were exchanged for a $656 million loan made from the proceeds of a marine conservation-linked bond, which benefits from political risk insurance from US International Development Finance Corporation and an $85 million guarantee from the Inter-American Development Bank.
As a critical part of the transaction, Ecuador agreed to provide more than $300 million of the savings it realises from this exchange to an independent grant-making body, the Galápagos Life Fund, a Delaware non-profit conservation fund (GLF). Among its roles in the transaction, Baker McKenzie was responsible for the set-up and structuring of the GLF, as well as the sustainability commitment documentation which sets out the uses for the funds provided and the marine conservation targets to be achieved.
Oceans Finance Company was founded to create a link between the impact benefits derived from the management of natural capital and nature-based solutions on the one hand and large-scale sources of blended finance capital on the other. Oceans Finance Company was the founding member of the GLF and will be the project manager for the transaction going forward.
Commenting on the deal, Matthew Cox, said: “It is fantastic to see this debt-for-nature swap, which will unlock much needed funds for marine conservation around the Galápagos Islands, come to fruition. It has been a pleasure to work with Oceans Finance Company from the initial structuring stages of the transaction to setting up the new Galápagos Life Fund and to assist and advise it going forwards.”
Ecuador’s debt-for-nature swap builds upon the examples of similar schemes in the Seychelles (on which members of the Baker McKenzie team acted in previous roles) Barbados and Belize, at a significantly increased scale and level of complexity.
The Baker McKenzie team was led by London Banking Partner Matthew Cox, and Washington D.C. Corporate & Securities Partner Tom Egan with support from London Structured Capital Markets Senior Associate James Tanner, London Capital Markets Senior Associate Ben Bierwirth, London Banking Associate Nick Parker and Washington D.C. Corporate & Securities Associate Taryn Brown. Tax partners Glenn Fox in New York and Rodney Read in Houston also assisted on the structuring of GLF.
