El Salvador launches debt buyback program amid uncertainty over its bitcoin bond

The government of El Salvador announced Monday (12) that it has offered to buy back a portion of its government bonds maturing in 2023 and 2025.

The country has set a purchase price of US$910 for the bonds maturing in 2023 and US$540 for the bonds maturing in 2025.

Each bond represents a total amount of US$800 million.

When El Salvador’s President Nayib Bukele unveiled the buyback plan in July, it was seen as an attempt to combat speculation about a possible default in the Central American country.

Relations with the traditional credit market were strained, especially after El Salvador adopted Bitcoin (BTC) as a legal tender in September 2021.

At this point, bitcoin investment in El Salvador has dropped by about 50% since inception, representing a potential loss of US$52.4 million, according to CoinDesk data based on Bukele’s announcements.

El Salvador’s US$1 billion bitcoin bond (also known as the “volcano bond”) does not yet have a launch date, although the country’s president announced it for November 2021.

Last month, Paolo Ardoino, chief technology officer of Bitfinex and Tether, who has worked closely with El Salvador on the bitcoin securities project, said government officials told him he expected approval in September.

The bond buyback offer is valid until Sept. 20, the El Salvador government said, adding that “settlement of the validly offered and accepted bonds is scheduled for Sept. 22.” Deutsche Bank Securities will act as manager.

The Central American country added that the offer is “subject to an aggregate amount not to exceed US$360 million for the purchase of the principal amount of the bonds accepted for tender and the payment of accrued interest and any premium on such bonds.”