Matheson LLP acted as Irish legal and tax advisors on a landmark transaction involving a debt conversion for the Republic of Ecuador, supporting terrestrial conservation in the Amazon basin. The transaction involved an Irish special purpose vehicle, Amazon Conservation DAC, which issued $1 billion in conservation bonds. The proceeds of the conservation bonds were used to acquire approximately $1.53 billion of Ecuador's sovereign debt, which was exchanged for a loan from Amazon Conservation DAC to Ecuador. Political risk insurance for the loan was provided by the U.S. International Development Finance Corporation, while the Inter-American Development Bank provided an $155 million partial credit liquidity guarantee. The transaction was arranged by Bank of America.
The debt conversion will generate approximately $800 million in net fiscal savings for the Republic of Ecuador, and unlock an expected $460 million in funding to support conservation efforts in the Amazon basin. The funding unlocked for conservation will support the Amazon Biocorridor Program, which aims to improve the management of 4.6 million hectares of existing protected areas and protect an additional 1.8 million hectares of forests and wetlands, while protecting cultural diversity and supporting the well-being of local communities.
The transaction is the latest example of a so-called “debt for nature swap”, a structure which has experienced significant interest in recent years. Matheson has previously advised on two successful debt for nature swaps respectively relating to marine conservation in Barbados and the Galápagos Islands.
Matheson's involvement was led by Finance & Capital Markets partners Christian Donagh and Alan Bunbury and associate Katie Mullane. The core team was assisted by Matheson lawyers across a range of practice areas, including Tax partner Kevin Smith and senior associate Finn Kelly.
Alan Bunbury, who co-led the Matheson team, said: "We are very proud to have worked on this innovative transaction which will have a hugely positive impact for the Republic of Ecuador and the forests and wetlands of the Amazon basin. The successful completion of another debt for nature swap using an Irish funding vehicle demonstrates the suitability of Irish SPVs for transactions of this nature. These transactions are excellent examples of the important role that global capital markets can play in supporting environmental conservation efforts".
