Rating Action Commentary
ֳ Rates El Salvador's USD1 Billion 2054 Bond 'CCC+'
Thu 21 Nov, 2024 - 9:37 AM ET
ֳ - New York - 21 Nov 2024: ֳ has assigned a 'CCC+' rating to El Salvador's USD1 billion bond maturing in 2054. The bond carries a coupon of 9.65%. El Salvador plans to use bond proceeds to repurchase outstanding debt and general budgetary purposes.
Key Rating Drivers
The bond ratings are in line with El Salvador's 'CCC+' Long-Term Foreign Currency Issuer Default Rating (IDR), affirmed on April 30, 2024.
ESG - Governance: El Salvador has an ESG Relevance Score (RS) of '5' for both Political Stability and Rights and for the Rule of Law, Institutional and Regulatory Quality and Control of Corruption. These scores reflect the high weight that the World Bank Governance Indicators (WBGI) has in ֳ's proprietary Sovereign Rating Model. El Salvador has a medium WBGI percentile ranking of 41.0%, reflecting a recent track record of peaceful political transitions, a moderate level of rights for participation in the political process, moderate institutional capacity, established rule of law and a moderate level of corruption.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
The bond rating would be sensitive to any negative change in El Salvador's Long-Term Foreign Currency IDR.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
The bond rating would be sensitive to any positive change in El Salvador's Long-Term Foreign Currency IDR.
Date of Relevant Committee
29 April 2024
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
El Salvador has an ESG Relevance Score of '5' for Political Stability and Rights as World Bank Governance Indicators have the highest weight in ֳ's SRM and are therefore highly relevant to the rating and a key rating driver with a high weight. As El Salvador has a percentile rank below 50 for the respective Governance Indicator, this has a negative impact on the credit profile.
El Salvador has an ESG Relevance Score of '5' for Rule of Law, Institutional, Regulatory Quality and Control of Corruption as World Bank Governance Indicators have the highest weight in ֳ's SRM and are therefore highly relevant to the rating and are a key rating driver with a high weight. As El Salvador has a percentile rank below 50 for the respective Governance Indicators, this has a negative impact on the credit profile.
El Salvador has an ESG Relevance Score of '4' for Creditor Rights as willingness to service and repay debt is highly relevant to the rating and is a key rating driver for El Salvador given the recent implementation of pension debt exchange that ֳ deemed a default.
El Salvador has an ESG Relevance Score of '4' for Human Rights and Political Freedoms as the Voice and Accountability pillar of the World Bank Governance Indicators is relevant to the rating and a rating driver. As El Salvador has a percentile rank below 50 for the respective Governance Indicator, this has a negative impact on the credit profile.
The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. ֳ's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on ֳ's ESG Relevance Scores, visit /topics/esg/products#esg-relevance-scores.
Additional information is available on
PARTICIPATION STATUS
The rated entity (and/or its agents) or, in the case of structured finance, one or more of the transaction parties participated in the rating process except that the following issuer(s), if any, did not participate in the rating process, or provide additional information, beyond the issuer’s available public disclosure.
APPLICABLE CRITERIA
APPLICABLE MODELS
Numbers in parentheses accompanying applicable model(s) contain hyperlinks to criteria providing description of model(s).
- Country Ceiling Model, v2.0.1 (1)
- Debt Dynamics Model, v1.3.2 (1)
- Macro-Prudential Indicator Model, v1.5.0 (1)
- Sovereign Rating Model, v3.14.1 (1)
ADDITIONAL DISCLOSURES
ENDORSEMENT STATUS
| El Salvador | EU Endorsed, UK Endorsed |