Bukele says that El Salvador paid US$800 million in bonds and avoids default

Salvadoran President Nayib Bukele assured that the country paid its foreign bonds due Tuesday in full, thus avoiding a default after obtaining a last-minute loan and repurchasing millions of dollars of its own debt.

The president announced the total payment of the principal and interest of US$800 million of the bonds in dollars of the Central American nation that matured on January 24.

Although a portion of the debt had previously been repurchased through government buybacks, about US$604 million was due Tuesday.

“Well, we just paid in full, US$800 million plus interest.

But of course, almost nobody is covering the story.

I just found one, yes ONE, in Spanish, from Colombia https://t.co/PcRES3poE1

They lie and lie and lie, and when their lies are exposed, they go in silence mode.”

— Nayib Bukele (@nayibbukele) January 24, 2023

El Salvador’s foreign bonds have risen an average of 24% this month as the maturity date approached, according to data compiled by Bloomberg.

Optimism sparked among investors and analysts after the country obtained a US$450 million loan from the multilateral entity Central American Bank for Economic Integration (CABEI), and carried out two debt repurchases.

After a successful payout, “we would expect the curve to go up a bit,” especially bonds due 2025 and 2027, said Nathalie Marshik, managing director of Latin America fixed income at BNP Paribas.

“However, the rally should be limited, because the market expected the payment and it is discounted.”

Still, investor concerns about El Salvador’s bonds persist due to the symbolic dismissal of several high-ranking magistrates, the nation’s risky bets on bitcoin (XBT), and the lack of agreement with the International Monetary Fund (IMF).

Investors are demanding an additional 14 percentage points of yield to hold El Salvador’s dollar debt in place of US Treasuries, according to data from JPMorgan Chase & Co., well above the threshold for the debt to be considered in difficulties.

The country still has about $6.4 billion in foreign currency bonds outstanding after the 2023 maturity, with the next major principal payment due in 2025, according to data compiled by Bloomberg.

The US$348 million of those bonds, which mature on January 30, 2025, were up nearly US$0.73 as of 8 a.m. Tuesday in New York.

With information from Bloomberg