El Salvador's Eurobonds Issue Qualified

After the country issued $1.097 million in Eurobonds for a 30-year term, Moody's gave them a "B3" rating, while Fitch Ratings assigned them a "B".

Thursday, August 1, 2019

Fitch Ratings has assigned a 'B-' rating to El Salvador's $1.097 million notes due January 2050. The notes have a coupon of 7.1246%, the agency said.

The Fitch statement dated July 31 adds that "... The proceeds from the issue will be used in accordance with local laws for general budgetary purposes, including the redemption of bonds maturing this year. The rating of the bonds is aligned with El Salvador's long-term foreign currency issuer default rating (IDR) of 'B-' with a stable outlook."

Moody's explained that "... El Salvador's B3 rating incorporates the country's low (+) economic strength, which takes into account El Salvador's relatively weak growth levels over the last decade, averaging only 2% from 2009 to 2018, with a slight acceleration to around 2.4% from 2015. It also reflects the country's relatively small economy ($26 billion in 2018) and the U.S.'s high dependence on exports and remittances. The low growth is partly due to El Salvador's low investment rates and productivity. Gross fixed investment averaged 16% of GDP in the 2010-18 period, compared to the B median of 23%. Despite the low growth dynamics, GDP per capita is in line with that of its peers with similar ratings ($8,041 against the B median of $8,467 PPP in 2018)."

See Moody's full report.

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El Salvador: Moody's Improves Risk Outlook

March 2020

The rating agency kept the country's debt rating at B3, but decided to change the outlook from stable to positive, arguing that the government's liquidity risks have been substantially reduced.

The affirmation of El Salvador's B3 sovereign ratings reflects high public debt ratios and a growing interest burden, the rating agency said.

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The rating agency decided to keep the debt rating at B3 with a stable outlook, arguing that the country's tax burden is high, but stable.

The last rating variation was made in February 2018, when it was reported that at that time the political agreement reached to approve the resources to pay pension funds and the reduction in liquidity risk based the decision of the rating agency to raise the score from Caa1 to B3.

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