El Salvador to Issue $800 Million in Eurobonds

The Salvadoran government recently announced that in October 2009 they will issue $800 million in Eurobonds.  The government will use part of the proceeds to finance the Global Anti Crisis Plan and parts of the State budget. El Salvador’s outstanding Eurobond debt is $324 billion, of which $654 million is due to expire in 2011.  Much of this new current bond issue will be used to pay out this short-term debt, essentially converting it into a longer 7-year debt.

Carlos Acevedo, the president of El Salvador’s Central Bank, says that the “the seven-year securities will pay an interest rate between 7-8%.”  In past weeks he also stated that “there is high demand for Salvadoran debt” and that “investors are eager to purchase bonds from El Salvador” which he interprets as “good news and a positive signal.”  

Walter Molano, head of research from BCP Securities says that “if El Salvador does get to market with this deal then it would be very well received.”  He states further that “there is still a lot of cash on the sidelines but it is hard to trade anything at the moment as the market is very illiquid and so this is a good moment for new issues, especially for smaller sovereigns.”

Eurobonds are bonds that are issued in a currency other than the currency of the country or market in which it is issued. As of mid-August, seven international investment banks are competing to issue the bonds.

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