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UPDATE 3-El Salvador to repurchase $565 mln bonds outstanding, offers second buyback

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NEW YORK, Sept 21 (Reuters) - El Salvador said on Wednesday it would spend the maximum $360 million allowed in its offer to repurchase bonds maturing in 2023 and 2025.

The discounted purchases result in the outstanding value of the bonds to be reduced by $565 million, the government said in a statement.

El Salvador said it received offers from holders of 54% of the principal amount of its bond maturing in 2025 and 22.4% of its 2023 bond.

President Nayib Bukele said via Twitter the operation had saved the country $275 million, adding it was “so successful” the government would launch another buyback offer for the amounts outstanding after the operation.

Bukele didn’t clarify if the new buyback, which he said would be held in eight weeks and at market prices, would have a cap.

The principal outstanding amounts accepted for repurchase were $133 million for the 2023 and $432.6 million for the 2025. The previous amount outstanding for each bond was $800 million.

Settlement is expected for Thursday, though El Salvador reserved the right to settle at a later date.

“We initiated a position in El Salvador’s bonds several months back as we believed the fundamentals were not properly reflected in the very depressed bond prices,” said Aaron Stern, managing partner at Converium Capital.

“We are pleased to see the government capitalizing on the market discount.”

The 2023 bond ended the day up 0.375 cents at 88.25 cents on the dollar and the 2025 rose 3.125 cents to 51.875 cents.

The buyback price offered by the government for the 2023 was set at 91 cents and the 2025 at 54 cents.

“Considering the challenges ahead, the price offer entails better terms for the holders of the 2025s,” analysts at JPMorgan said last week after the offer was launched.

The bank had expected participation among the 2023 holders to be limited, “considering the perceived (high) probability of it getting paid in January,” when the bond matures. (Reporting by Rodrigo Campos; additional reporting by Nelson Renteria in San Salvador, editing by Grant McCool, Diane Craft and Lincoln Feast.)