El Salvador returned to global debt markets with an offering that will pay investors a higher interest rate if the government fails to win credit upgrades or a deal with the International Monetary Fund.
The Central American nation priced $1 billion in debt due in 2030 at 89.923 cents on the dollar to yield 12%, according to people familiar with the matter. The coupon is 9.25%, they said, and the note amortizes starting in 2028.
The deal includes an additional interest-only security tied to nation’s credit score or an IMF deal.
If El Salvador fails to get at least two upgrades to a rating of B, which is five steps below investment grade, or strike a deal for a loan package with the IMF by October 2025, those coupon payments will jump to 4% from 0.25%, said the people, who asked not to be identified because they’re not authorized to speak about it.
It’s the first bond deal in nearly four years for the junk-rated borrower and follows a broad rally in El Salvador’s debt.
Some of the proceeds of the deal would be used to help fund a buy back of existing notes due in 2025, 2027 and 2029, which have a combined $1.75 billion outstanding. It’s unclear how much the nation is offering to repurchase. The repurchase offer expires April 15 at 5 p.m. in New York.
BofA Securities Inc. is managing both deals.
El Salvador debt has posted world-beating returns of 215% since July 2022 as President Nayib Bukele’s government carried out two bond buybacks, refinanced local, short-term paper and orchestrated an exchange of pension debt. The rally has lost steam recently amid fiscal deterioration and waning hopes of an imminent agreement with the IMF.
Fitch Ratings and Moody’s Ratings have El Salvador scored seven notches below investment grade, while S&P Global Ratings has it a level higher.
The country last sold bonds at the height of the pandemic when it priced $1 billion of debt at a coupon of 9.5%. Since then, only four countries have paid higher coupons to sell dollar notes, according to data compiled by Bloomberg. (https://finance.yahoo.com/news/el-salvador-returns-debt-market-132559836.html)
