The period of offer for investors to sell the Salvadoran bonds in their possession begins today and ends on October 10.
El Salvador returns to international markets to try to repurchase the bonds in circulation that are in the hands of foreign investors, whose maturity periods range from 2027 to 2052.
President Nayib Bukele announced this Friday, through his X account, that since October 4 the deadline begins and ends on October 10 for the holders of these Salvadoran bonds to agree to sell them.
“Everyone who has bonds from the Republic of El Salvador can access this public and voluntary repurchase,” the president said in his message, accompanied by the document with the details of the offer.
According to the document released by the PRNewswire site, it is $633 million of the 2027 bond; $529.5 million of which expires in 2029; $1 billion from the 2030 bonus; another $286.45 million from 2034.
They also plan to repurchase another $1 billion from the $2035 bond; in addition to $653.5 million for which it expires in 2041; $1,097 million from the 2050 bonus and another $1 billion from which it expires in 2052.
But they also include $1 billion of “bumps,” i.e. bonds that came out to market in April this year at a rate of 12%, the most expensive to date. Although in this case, as explained in the document, they would buy only the interest on these bonds.
In total, all bonds held by foreign investors amount to $7,181 million, which have interest rates between 6.4 percent and 9.5 percent.
Purchase prices offered by the government range from $24 to $1,025.
According to the document launching the offer, this repurchase “is part of a broader program in El Salvador to manage its external public debt proactively and promote certain conservation and sustainability efforts in El Salvador.”
SEE: El Salvador Agrees to Rebury Bonds for Nearly $487 Million
He adds that “El Salvador may, in the future, repurchase or redeem the unbidden or purchased Bonds in the Invitation, or repurchase or redeem others of its public debts.”
It is also explained that “the right, in its sole discretion, to accept only part of the bonds offered, not to accept any or all offers and to extend or terminate the Invitation is reserved for one or more series for any reason.”
And he states that this operation “is part of a refinancing transaction to realize savings and promote certain conservation and sustainability efforts of El Salvador.”
In the opinion of an economist expert, who prefers not to be quoted, “the strategy to be affective (the repurchase of bonds) must involve a source of resources, which may include own income, loans or a new issue that contemplates a significant interest reduction, since bond prices are close to 100% of their nominal value. So there is no savings in capital, but it will only be savings in interest.”
The specialist added that if the agreement with the International Monetary Fund (IMF) is about to take place, as the government says, “this can be a good source of low-cost financing for this operation.”
This is not the first bond buyback to launch in 2024. In April, the government bought bonds due between 2025 and 2029 for $486.7 million, including interest. And in 2022 he made two operations to buy foreign debt in advance for $647 million.
According to economist Rafael Lemus, this is another debt management that allows the government to extend the maturity deadlines. “Given going back to repurchase the markets the nearest bonds is a way to clean up the next maturities they have scheduled. By cleaning up these maturities, it leaves the space freer to honor the other commitments,” he said.
Lemus added that the government’s efforts with bond management have taken on the market. However, he stressed that while the country’s credit risk is reduced, El Salvador’s 10-year bonds are still paying rates of up to 9.70% of return, which is high.
“The government still has the main task: to solve the problem of debt unsustainability; it does not solve the fiscal problem, because we have high debt with high interest rates… it is a risk if no adjustment is made,” said the economist.
This article has been translated after first appearing in El Salvador