News from El Salvador for
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El Salvador sells $800 million of 10-year bonds
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| Published on Saturday, November 21, 2009 | Email To Friend Print Version
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By Lester Pimentel and Veronica Navarro Espinosa
NEW YORK, USA (Bloomberg) -- El Salvador paid two percentage points more than Panama in a sale of $800 million of bonds as the Central American country tapped debt markets less than a week after having its credit rating cut to junk.
The country sold the 10-year bonds to yield 7.375 percent, or 403 basis points above US Treasuries, according to Bloomberg data. A basis point equals 0.01 percentage point. Citigroup Inc. and JPMorgan Chase & Co. arranged the sale, said a person familiar with the offering who declined to be identified because he’s not allowed to speak publicly.
Moody’s Investors Service cut El Salvador’s credit rating to Ba1 from Baa3 and kept the outlook negative Nov. 15, citing an economic “collapse” and “high dependence” on the US. Panama, also rated Ba1, sold $1 billion of 10-year dollar bonds to yield 187.5 basis points above Treasuries, on Nov. 16, a week after Standard & Poor’s boosted its rating outlook on prospects an expansion of the Panama Canal will propel economic growth.
The two countries “are closely rated, but the trajectory is different,” said Kathryn Rooney, an emerging-markets analyst at Bulltick Securities Corp. “Panama is a more diversified economy and it has a canal. El Salvador is very vulnerable to US remittances. It’s a weaker credit. It makes sense to have a higher yield.”
Panama is rated BB+, one level below investment grade, by S&P.
Latin American countries are tapping international credit markets as a global economic recovery fuels demand for higher- yielding assets. The yield on El Salvador’s 7.65 percent bonds maturing in 2035 has tumbled to 7.99 percent from 12.70 percent on Dec. 31, according to Bloomberg data. The bond’s price rose to 96.27 cents on the dollar from 61.78 cents during that period.
El Salvador will use proceeds of the bond sale to refinance domestic debt, according to a Fitch Ratings report. Fitch rates the country BB, two levels below investment grade.
The country may raise $300 million for relief efforts by selling bonds after floods and mudslides left at least 157 people dead and thousands homeless, Roberto d’Aubuisson, a congressman on the Budget and Economy Commission said last week. President Mauricio Funes declared a state of emergency on Nov. 8 following a two-day storm that dumped heavy rains over coffee- growing regions in central El Salvador.
El Salvador’s bond sale is a “a necessary issuance,” Rooney said. “There’s a sense of urgency. They need money to cover a lot of the spending from natural disasters and the deficit.” | | | | Reads : 136 |
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