In line with the agreement and subject to the conditions outlined in the Invitation announced On November 29, 2022 (the “Invitation”), the Republic of El Salvador today announced the official start of an open invite for each owner to submit bids (the “Offers”) to offer for cash the Notes. Those who tender their 2023 Notes will receive El Salvador’s preference.
El Salvador’s President Makes Statement On Twitter
Using his Twitter account, El Salvador’s President announced, “As stated, today we started the opportunity to purchase our outstanding foreign debt due between 2023 and 2025.” The President has stated that any bondholder may participate in a voluntary repurchase. When we were here before, there were still 46 million Dollars available.
Bukele announced the repurchase of the country’s debt in September. About 565 million dollars worth of government debt due in 2023 and 2025 has already been repurchased by El Salvador.
The Bukele government is attempting to save El Salvador from defaulting on its $800 million debt. As stated by the President, he has access to $360 million from the SDR allocated by the IMF to its member countries to take action during the COVID-19 outbreak.
Any holder seeking to submit Offers for Notes shall (a) submit through To the Depository Trust Company (“DTC”) according to DTC’s Automated Offer Program (“ATOP”). And (b) instruct the holder’s stockbroker, dealer, trust company commercial bank, or another nominee to complete the transaction.
Notes offered according to the Invitation may be withdrawn before the Expiration Time in line with the methods to enhance under “The Invitation—Withdrawal Rights.” However, it may not be removed after the Expiration Time.
Rising Fears About El Salvador’s Ability To Repay Debts
El Salvador has been the subject of persistent predictions that it will be unable to satisfy its upcoming financial obligations. In September last year, El Salvador formally recognized Bitcoin as legal cash.
Nayib Bukele started investing heavily in bitcoin right around that time, taking advantage of price drops to make his purchases. And yet, despite Bitcoin’s ongoing decline, Nayib Bukele stands firm, eager to buy any further price drops.
Many credit rating agencies cautioned El Salvador about the risk of investing in Bitcoin. According to Fitch Ratings, the intrinsic price volatility of bitcoin, the absence of financial inclusiveness in the country’s banking system, and the lack of widespread internet access are all factors that have prevented its widespread adoption.
After multiple agencies lowered El Salvador’s credit rating, the country was hit with sky-high interest rates on any repayments. According to the IMF, El Salvador has volatility risks, which was intended to help the government repay its debt in January 2023. Therefore, the IMF is unlikely to assist El Salvador in satisfying its obligations.
