(Reuters) – S&P Global (NYSE:) said on Friday it could downgrade El Salvador’s already negative credit rating within six to 18 months if it does not make “appropriate progress” on reducing debt, days after the government announced buyback plans. Sovereign bonds.
Standard & Poor’s maintained El Salvador’s “CCC-plus” rating, seven notches in non-investment speculative territory, four days after its government said it would buy back up to $360 million in sovereign bonds, at S&P slightly above market prices.
El Salvador on Monday launched an offering of bonds maturing in 2023 and 2025.
“We consider the debt buyback to be opportunistic and similar to the liability management process, given that we believe the government could have met its financial obligations in the near term in the absence of this deal,” Standard & Poor’s said in a statement.
The rating agency said there was at least a “one in three” chance of a rating downgrade if the government did not make much progress on its debt or if any problems emerged with its willingness to pay.
Fitch downgraded El Salvador’s sovereign debt to “CC” from “CCC” on Thursday, describing a debt default as a possibility.
Standard & Poor’s said it believed the government could meet debt service payments over the next year, but added that delays in obtaining funding and corrective fiscal measures could hurt investor confidence.
She said the ratings reflect long-standing difficulties in predicting policy responses, low economic output, continued low investment and a lack of resilience due to the dollarization of the economy, which has persisted since El Salvador introduced bitcoin as a legal tender alongside the US dollar.
President Najib Bukele, who has led the campaign to accept bitcoin, said Thursday that he would run for re-election in 2024, despite the constitution’s ban on presidents for consecutive terms.