Breaking News
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

El Salvador to buy back some debt in surprise move

Economy Jul 27, 2022 12:30AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: A sign reading "Bitcoin accepted here" is seen at a store where the cryptocurrency is accepted as a payment method in San Salvador, El Salvador October 4, 2021. Picture taken October 4, 2021. REUTERS/Jose Cabezas
 
MS
-1.98%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
TWTR
-1.18%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

By Nelson Renteria

SAN SALVADOR (Reuters) - El Salvador's president announced on Tuesday a plan for a voluntary repurchase offer to holders of bonds maturing between 2023 and 2025.

The operation would be partially funded by reserves allocated last year by the International Monetary Fund and a loan from a Central American multilateral lender, the finance minister said later on Tuesday.

President Nayib Bukele has been under pressure to demonstrate healthy public finances as the country's options dwindle ahead of an $800 million bond maturity in January.

His bet on bitcoin, which operates in El Salvador as a legal tender alongside the U.S. dollar, narrowed El Salvador's financing options as the International Monetary Fund closed the door to a loan of over $1 billion after the cryptocurrency move.

In a post on Twitter (NYSE:TWTR), Bukele said the country has enough cash not only to pay debt commitments at maturity, but to purchase the debt even before it matures.

The bond maturing in January was trading at 74 cents on the dollar on a 82% yield, while the remaining issues traded in distressed territory hovering in the low 30 cents.

Prices had started to spike last week, partly boosted by a Morgan Stanley (NYSE:MS) note that said Salvadoran debt was too cheap and prices were below most restructuring scenarios.

MARKET PRICE BUYBACK

The buyback process would likely cost around $1.7 billion, according to a Citi Research note on Tuesday that said the estimate is expected to rise based on early market reaction.

"Today we are sending 2 bills to Congress to ensure that we have the available funds to make a transparent, public and voluntary purchase offer to all the holders of Salvadoran sovereign debt bonds from 2023 to 2025 at whatever the market price is at the time of each transaction," Bukele tweeted, adding that "the market price will probably move upwards once we start buying all the available bonds."

El Salvador's unicameral Congress approved both bills, one requesting to use $360 million in funds from special drawing rights allocated by the IMF to repurchase the bonds, and another to request a $200 million loan from the Central American Bank for Economic Integration (BCIE), in majority votes Tuesday evening.

The Central American country's total public debt was about $24 billion in March, according to central bank data.

The debt buyback offer, which was unexpected, will likely cause the price of short-end bonds to rise, Citi analysts added.

"Risks are high and the situation remains very fluid," they wrote.

Bukele added that the buyback will start in six weeks.

It was unclear where the more than $1 billion remaining to complete the operation would come from.

El Salvador to buy back some debt in surprise move
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email