Credit rating agency Fitch has lowered El Salvador’s credit rating and warned that the liquidity situation is “dangerous”.

El Salvador’s president, Nayib Bukele

Risk Measurement Agency Fitch Ratings I reported on Thursday that Default rating of foreign currency issuer downgraded The long-term savior I noticed it Liquidity Situation ‘Dangerous’ Before the Eurobonds were paid in January 2023.

Fitch indicated in a prospectus that the foreign currency rating has been placed at “CC” from the previous “CCC”.

President of El Salvador, Neb BokelOn Monday, it announced the opening of an early purchase offer of its debt in bonds due in 2023 and 2025, with a maximum of $ 360 million.

The rating agency noted that “the downgrade of El Salvador’s rating to CC reflects Fitch’s view that El Salvador’s tight financial and external liquidity positions, and access to markets are very restricted amid a financial rally and a large foreign bond maturity of $800 million in January 2023, leading to a kind of default. Likely to.”

Fitch Ratings has downgraded El Salvador's credit rating and notes that there is a high probability of default.
Fitch Ratings has downgraded El Salvador’s credit rating and notes that there is a high probability of default.

He pointed out that “the government of savior It recently announced a voluntary 360 million cash buyback of its overseas bonds worth 2023 s 2025 Below average, which is likely to weaken an already strained liquidity position.”

He pointed out that “the external position of savior weakened in the middle of a The current account deficit and the expected external consumption will rise“This is expected” a The current account deficit reached $2.4 billion in 2022 (7.8% of GDP) and estimates of nearly 400 million in external repayment with another 800 million due in January 2023.

The rating agency added that among the factors that could, individually or collectively, lead to a positive rating upgrade, is the full and timely repayment of the amortization of Eurobonds in January 2023.

In addition to the continued easing of funding constraints through advances in liberalizing predictable sources of funding.

savior offer a price $910 for every $1,000 of bonds due in 2023 and 540 for every $1,000 in 2025 bonds.

“The goal is to buy all the debt available on the market from 2023 to 2025,” the Salvadoran president noted.

El Salvador offers a rate of $910 for every $1,000 of 2023 bonds and $540 for every $1,000 of 2025 bonds.
El Salvador offers a rate of $910 for every $1,000 of 2023 bonds and $540 for every $1,000 of 2025 bonds.

“The purchase price does not include the accrued and unpaid interest applicable up to the settlement date,” adding that “on the settlement date, holders will also receive the accrued interest on the bonds properly offered and accepted for purchase.”

Between 2023 and 2025, Salvadorian bonds matured at $1,200 millionAccording to the Statistical Register of Securities Issues of the Republic of El Salvador of the Financial System Supervision Authority (SSF).

The government of El Salvador hired as a mediator in this process Deutsche Bank Securities.

In an interview with the news agency EFE At the beginning of August the Minister of Finance, Alejandro Zelaya “Investors have two options: sell with pre-purchase to be launched or hold to maturity and El Salvador will comply,” he said.

“The process is fully framed in market rules, does not violate the contractual terms of our bonds and increases the confidence of our investors,” he emphasized.

At the request of the government BukelliCongress made the “use of special drawing rights” available in Central Reserve Bank For 365 million, and a loan of 200 million with Central American Bank for Economic Integration To pre-purchase bonds.

rating agency Moody’s At the beginning of May, El Salvador’s long-term foreign currency bonds were reduced due to the possibility of default on the debt that the country must repay in 2023 and 2025 and the lack of a “credible plan” to cope with the situation.

(With information from EFE)

Read on:

El Salvador marked the new anniversary of its independence with protests for and against Deputy Bokil
Bukele’s government extended the emergency system for the sixth time despite criticism of human rights abuses
A year later, the Bitcoin experiment in El Salvador was a fiasco

Leave a Comment