Maples Group Assists with El Salvador’s Landmark Debt for Nature Transaction

The Maples Group is pleased to announce that it assisted with the Republic of El Salvador’s landmark US$1 billion debt for nature transaction which will restructure part of the Republic of El Salvador’s sovereign debt and allocate savings to help support conservation and water security in the country.

A multi-disciplinary team acted on the ‘debt-for-nature’ deal, which saw the Republic of El Salvador repurchase over US$1 billion of its outstanding international bonds and issue US$1billion of impact notes (the “Notes”) that were purchased by RLC SPV Ltd. (“RLC”) – a Cayman Islands special purpose vehicle established by the Maples Group, using the proceeds of a loan from JP Morgan. The Maples Group’s legal team advised as to Cayman Islands law, while the Group’s fiduciary team provided a full suite of services to RLC.

In what has been acclaimed as the world’s largest debt buyback for river conservation, the transaction structure features credit enhancement from US$1 billion of political risk insurance policy from the US International Development Finance Corporation, the US government’s international development bank and US$200 million in standby letter of credit from the Development Bank of Latin America and the Caribbean (CAF). ArtCap Strategies acted as financial adviser to the Republic of El Salvador and global coordinator for the transaction.

The transaction will allow the Republic of El Salvador to save more than US$350 million on debt repayments over the life of the deal. These funds will be applied to the Rio Lempa Conservation and Restoration project, which is one of the longest rivers in Central America and critical to providing water for drinking, as well as for industry and the Republic of El Salvador’s diverse ecosystem.

The Maples Group’s legal team in the Cayman Islands was led by Partner and Co-head of the Latin American practice, Finn O’Hegarty with assistance from Associate, Maximilian Chung. The Fiduciary Services team was comprised of Co-Head of the Cayman Islands Structured Finance (Fiduciary) business, Peter Lundin, Senior Vice President Phillip Hinds and Vice President Samuel Maguire.

This transaction adds to the Maples Group’s increasing participation in the burgeoning debt-for-nature market, as developing countries seek to address public debt and key environmental issues. In 2021, the Maples Group advised on the issuance of Belize’s US$364 million Blue Bond for Conservation, which was previously the largest ever Blue Bond to be executed.

“The Maples Group is delighted to have participated in this innovative debt-for-nature transaction which has restructured The Republic of El Salvador’s debt profile, while providing support towards such important environmental goals in the country,” commented Finn O’Hegarty.

“This was a fantastic team effort across multiple departments and service lines from within the Maples Group, a testament to our ability to assist clients in very bespoke and complicated transaction structures.” added Peter Lundin.