Arnold & Porter advised the Republic of El Salvador in connection with a first-of-its-kind offering of US$1 billion in aggregate principal amount of its 9.25% Notes due 2030 (2030 Notes) and US$1 billion in reference notional amount of Macro Variable Interest Only Step-Up Notes (Interest Only Notes). This marks El Salvador's return to the international capital markets after a four-year hiatus.
The offering was coupled with a simultaneous tender offer for El Salvador's outstanding 5.875% Notes due 2025, 6.375% Notes due 2027, and 8.625% Notes due 2029. The offering included a unique feature which provides for an increase or decrease in the interest rate on the Interest Only Notes, depending on whether El Salvador has reached an agreement with the International Monetary Fund for a Stand-by Arrangement or Extended Fund Facility or met a minimum ratings trigger. The offering of the 2030 Notes and the Interest Only Notes closed on April 17, 2024, and the tender offer closed on April 19, 2024.
Approximately half of the proceeds of the offering were used to repurchase notes tendered by holders in the tender offer. The remaining proceeds will be used to repay external indebtedness and other obligations of El Salvador's Ministry of Finance. The offering was conducted under exemptions from the U.S. Securities and Exchange Commission's registration requirements laid out in Rule 144A for sales to qualified institutional buyers and Regulation S for sales outside the U.S. The 2030 Notes and Interest Only Notes will be listed on the Luxembourg Stock Exchange.
The Arnold & Porter team was led by partner Whitney Debevoise, co-chair of the firm's Sovereign Finance practice, and also included partner Simon Firth, counsel Arturo Caraballo, and associates Valentina Garzon, Stacey Menjivar, and Mateo Morris on sovereign finance issues; partner David Sausen, senior associate Reuven Graber, and associate Lauren Hoepfner on tax issues; and associate Trevor Schmitt on export controls and sanctions issues.
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