White & Case advises Republic of El Salvador on the world's largest debt-for-nature conversion for river conservation

Global law firm White & Case LLP has advised the Republic of El Salvador on the world's largest debt-for-nature conversion for river conservation and the world's largest debt-for-nature conversion in terms of the size of funding commitments for conservation.

The conversion comprises El Salvador's issuance of US$1 billion 20-year impact notes to a special purpose vehicle and the concurrent tender offer of a portion of its outstanding notes using the proceeds of the new impact notes. The new notes were purchased by a special purpose vehicle from the proceeds of a loan from JPMorgan Chase Bank, as original lender.

The conversion has allowed the Republic of El Salvador to refinance more than US$1 billion of its outstanding notes and generate an expected US$352 million in lifetime savings through a combination of immediate notional debt savings and material reductions in debt service costs. US$350 million of these savings will be applied to the Rio Lempa Conservation and Restoration Program over the next 20 years in support of the country's commitment to watershed conservation in the Rio Lempa basin, which is one of the longest rivers in Central America and plays key role in the well-being of communities and the economy of El Salvador. This allocation represents the largest funding commitment a country has ever made for conservation in a debt conversion transaction.

The terms of the conservation funding include certain conservation and sustainability commitments by the Republic, including establishing a zonal organization to oversee conservation and restoration of the Rio Lempa watershed, establishing a water resources data monitoring system for the Rio Lempa watershed, and declaring 75,000 hectares of protected aquifer recharge zones throughout the watershed by 2044.

The US International Development Finance Corporation (DFC) provided political risk insurance, and the Development Bank of Latin America and the Caribbean (CAF) issued standby letters of credit. This credit enhancement provided support for the transaction, helping to catalyse additional investment in El Salvador's conservation and eco-system restoration efforts in the Rio Lempa watershed.

ArtCap Strategies acted as financial advisor to the Republic of El Salvador and global coordinator for the transaction. JPMorgan Chase Bank 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 notes.

White & Case has advised longstanding client El Salvador on a number of transformative projects beginning in 2021, led by partner Prat Vallabhaneni (New York) and associate Isabella Bellera Landa (Washington, DC).

The White & Case team advising on this transaction was led by Capital Markets partners Olga Fedosova (Paris) and Ian Clark (London), and M&A partner Prat Vallabhaneni (New York), and included International Arbitration associate Isabella Bellera Landa (Washington, DC), Capital Markets associate Amulang Povaeva (London) and Project Development and Finance associate Grétel Martínez (Miami). The team also included Capital Markets partner Ian Cuillerier and associate Elle Cotzomi (both in New York); Debt Finance partner Sabrena Silver (New York); and International Arbitration partner Nicolle Kownacki and associate Alec Albright (both in Washington, DC).

The parties' joint release can be found here.

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