CORRECTION: This article was corrected on Monday April 15 to say that the new bonds are macro-linked and are not tied to GDP growth.
El Salvador is preparing to sell its first international bonds in almost four years as its government moves to take advantage of booming investor demand for riskier debt, market sources told LatinFinance.
The Salvadorian government began calling investors on Monday to pitch the US dollar-denominated, macro-linked notes, said a source involved in the deal.
Finance Minister Jerson Posada is leading the meetings with investors, the source said, adding that Bank of America is the sole bookrunner on the proposed Rule 144A/Reg S deal.
El Salvador’s risk premium has dropped and the price of its 2029 notes has skyrocketed to about 90 cents from 40 cents last year amid a surge in demand for frontier market bonds, said Beth Morrissey, managing partner at Washington DC-based emerging markets advisory firm Kleinman International Consultants.
Give the rally in El Salvador’s bonds and “broad investor appetite for riskier debt, the timing is good, especially because they still don’t have an IMF program,” Morrissey said.
The proceeds of the sale would be used to fund a tender offer announced on Monday for bonds that mature between 2025 and 2029, according to the source close to the deal. The buyback would be the third carried by the government out since 2022. Bank of America is also dealer manager on that deal.
El Salvador last issued bonds overseas in July 2020, when it printed $1 billion worth of 32-year notes to fund its efforts to bolster the economy during the COVID-19 pandemic.
S&P Global Ratings raised El Salvador’s credit rating to B- from CCC+ last November citing the country’s efforts to refinance short-term debt and mitigate its default risk.