Norton Rose Fulbright represents CAF in world’s largest debt conversion for El Salvador river conservation

Norton Rose Fulbright represented the Development Bank of Latin America and the Caribbean (CAF) in the US$1 billion refinancing of US$1.031 billion of El Salvador’s outstanding bonds, with the savings dedicated to conservation, water security and ecosystem restoration efforts in the Lempa River watershed. This funding, which is the largest debt conversion transaction of its kind to date, will also stimulate economic development through regenerative agriculture.

The transaction was a joint effort from CAF, US International Development Finance Corporation (DFC), Catholic Relief Services (CRS), the Environmental Investment Fund of El Salvador (FIAES), ArtCap Strategies and the Government of El Salvador. CAF is providing a US$200 million in standby letters of credit, while DFC is providing US$1 billion in political risk insurance. JPMorgan Chase Bank, N.A. acted as sole arranger and lender for the loan and J.P. Morgan Securities LLC acted as dealer manager in the tender offer for El Salvador’s bonds.

By combining immediate national debt savings and material reductions in debt service costs, the Government of El Salvador will realize more than US$352 million in lifetime savings through this transaction. Over the next 20 years, US$350 million of these funds will be applied to the Rio Lempa Conservation and Restoration Program—the largest funding commitment a country has ever made for conservation efforts in a debt conversion transaction.

Among the longest in Central America, the Lempa River watershed plays an integral role in El Salvador’s ecosystem by providing drinking water, hydropower generation and irrigation. Projects funded by the savings realized from the transaction will enhance water quality, quantity and reliability, strengthen climate resilience, protect the watershed’s natural ecosystem and mitigate water security risk in the region.

Norton Rose Fulbright’s deal team was led by Kenneth Hansen and Micaela Garcia-Ribeyro (Washington, DC) and also included Daniel Salomón Sotomayor (New York).

CAF’s legal team supporting this transaction included Rosalía Román-Urcuyo (Director - Non-Sovereign Operations Legal Affairs), José Daniel Jiménez (Director - Sovereign Operations Legal Affairs), Mireylle Carrillo (Lawyer - Sovereign Operations Legal Affairs), Andrea Trocel (Lawyer - Sovereign Operations Legal Affairs), Hernán Vidal Baute (Lawyer - Non-Sovereign Operations Legal Affairs) and Tonia Orozco (external consultant).