The government managed to place $2 billion, when the offer was $1,000. In this way, the Salvadoran State returns to the international market four years later.
The Salvadoran State placed $1 billion in bonds on the international market this Thursday. The government successfully placed the $1 billion with a coupon (the interest paid on the bonus) of 9.25%, but with a return of 12 % for investors, according to sources close to the negotiation
The Central American nation set the price of $1 billion in debt due in 2030 at 89,923 cents to surrender 12 per cent, according to people familiar with the matter. The coupon is 9.25 per cent, they said, and the note is amortized from 2028,” highlights a report by Bloomberg, a site specializing in finance and macroeconomics.
In addition, according to the sources, the government managed to place $2 billion, when the offer was $1,000. In this way, the Salvadoran State returns to the international market four years later.
The deadline is six years with capital amortizations of one third in the years 2028, 2029 and 2030. The placement has some conditions for the first time: if the country does not meet certain requirements, it will pay investors more.
The conditions are to reach an agreement with the International Monetary Fund (IMF), on another loan, but at a very low interest (possibly 2 per cent); or make a unilateral fiscal adjustment. In addition, it must improve its risk ratings, which are the lowest in Central America.
If it does not comply, El Salvador will give investors 0.25% more from October 2025 and, if it fails again in 18 months (2026), it will give it 4% more; that is, it could pay a rate of up to 16% for this debt.
It is clearly a bad business for the country, as up to 75 per cent would be used to anchor the Eurobond buyback of 2025, 2027 and 2029, which have an interest rate of about 6 %.
It’s as if a person decides to pay what they owe on a real estate loan through a credit card.
This article has been translated from the original which first appeared in El Salvador