S&P upgrades El Salvador, debt

S&P said it raised its long-term foreign and local currency sovereign credit ratings on El Salvador to CC from SD (selective default).

The outlook on both long-term ratings is negative.

In addition, the agency upgraded the short-term ratings to C from SD and the issue credit rating on the foreign currency senior unsecured debt to CCC from CCC-.

The AAA transfer and convertibility (T&C) assessment is unchanged.

“El Salvador's government resolved on April 28 the missed payments on financial obligations coming from the Certificates for Pension Investments (CIPs) amounting to $56.5 million. This action follows Congressional approval of a budget reallocation of the same amount of missed payments one week before,” S&P said in a news release.

“The congress also approved a bill that extends the term of CIPs to 50 years from 25 years, includes a five-year grace period for capital payments, and modifies interest rates (only for new CIPs issuances) from 3.5%-5.5% to 4% and, beginning February 2019, to 5.5%.

“We consider that investors will receive less value than the promise of the original CIPs because expected certificates' maturities extend beyond the original, and the timing of payments is slowed given the capital payments grace period,” the agency explained in the release.

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