The media interpreted President Nayib Bukele’s bet on bitcoin as an attempt to avoid a default. But El Salvador demonstrates that it has sufficient cash, even enough to purchase debt before it matures. It has announced the invitation of offers to repurchase a portion of its sovereign debt bonds due in 2023 and 2025.
The Republic of El Salvador has invited holders of ‘7.75% Notes due 2023’ and ‘5.875% Notes due 2025’ to submit offers. It set a purchase price of $910 for bonds maturing in 2023 and a price of $540 for bonds maturing in 2025. Each bond is worth $800 million (as of September 12).
Bukele announced his plans for a voluntary repurchase offer to bondholders with maturities between 2023 and 2025 in July. He was under pressure to show sound public finances as El Salvador’s options dwindled ahead of an $800 million bond maturation in January.
When Morgan Stanley stated that Salvadoran debt was too cheap and prices were below most restructuring scenarios, bond prices shot up, persuading investors to purchase Bitcoin bonds from El Salvador.
Speaking of the current bond repurchase situation, the invitation to submit an offer will be available between September 12 and September 20, with the “settlement of validly tendered and accepted notes scheduled to occur on or about September 22.”
Accrued Interest on Notes validly tendered and accepted for purchase will also be paid to Note holders. The dealer manager will be Deutsche Bank Securities.
El Salvador’s announcement also stated that the offer is “subject to an aggregate amount not to exceed $360 million to purchase the principal amount of notes accepted for tender.”
