Exor believes that the positive effects of the Salvadoran bond buyback are significant

The international financial services firm Exor Latin America highlighted the repurchase maneuver of Salvadoran bonds maturing in 2023 and 2025, whose results were announced by the President of the Republic, Nayib Bukele, on September 21, indicated a positive reception by the markets.

The country managed to repurchase a total of $565 million of securities, of which $133 million correspond to those maturing in 2023, that is, 22%, and $432 million of those maturing in 2025, which means 54% of the outstanding bonds up to that date. date.

Exor considers that the advance purchase operation was carried out «apparently with the objective of demonstrating El Salvador’s capacity to cover its short and medium-term financial obligations.»

In this sense, it stands out that the impact of this external liability management strategy meant an increase in the price of the bond maturing in 2023, which at the end of the transaction closed with an increase in the price of the bond from 65% to 94% of its value. even value

On the other hand, Exor mentions, the bond maturing in 2025, which came to be listed at a price of 28% with respect to its value, exhibited behavior similar to that of the 2023 bond. This title has recovered ground, reaching a value close to 60% of its par value.

International banking perspective

The finance company highlights the opinions generated by investment banks with market participation before the execution of the debt repurchase and observes that, although there are banks like Santander that say that this little impact on bond prices, there are other institutions such as Bank of America that endorsed the measure and the rest of the economic actions carried out by the government.

Bank of America has said that El Salvador «can get ahead», in a statement issued last week, the international financial entity applauded the important tax collection promoted by the Ministry of Finance (MH) and considered that the country is capable of complying with its financial commitments in the short and medium term.

In this panorama, Exor analyzes that at the end of the first semester of 2022, favorable results are shown in the budget of the Central Government. Revenues amount to $4,067.3 million, which represents a growth of 26.5% compared to the same semester of 2021.

In addition, he adds that «a contraction in public spending is already beginning to be observed, which may be a reflection of the state’s search to make more efficient use of its resources.»

It is worth mentioning that, in light of the results, which include savings for the state of $275 million in debt payments, President Bukele announced that in December a second repurchase execution of the remaining securities maturing in 2023 and 2025 will be carried out. that remain in circulation on the market.