Global law firm Clifford Chance has advised J.P. Morgan on a $1 billion debt for nature transaction involving the Republic of El Salvador, U.S. International Development Finance Corporation (DFC), the Development Bank of Latin America and the Caribbean (CAF), Catholic Relief Services (CRS), the Environmental Investment Fund of El Salvador (FIAES) and ArtCap Strategies.
J.P. Morgan provided a $1 billion loan for the transaction. El Salvador used the proceeds of the transaction to repurchase over $1 billion of its outstanding international bonds. DFC provided a $1 billion political risk insurance policy and CAF provided $200 million in standby letters of credit.
Through this debt for nature transaction, El Salvador is expected to realize more than $352.5 million in lifetime savings. $350 million of these savings are expected to be applied to the Rio Lempa Conservation and Restoration Program, which will be used partially to fund the Program directly and partially to fund an endowment. Projects funded by the savings from the transaction are expected to enhance water quality, quantity, and reliability; strengthen climate resilience; protect the watershed’s natural ecosystem; and mitigate water security risk in the region. The funds in the endowment will be invested and are intended to become a source of ongoing funding for the Program beyond 2044.
As part of the transaction, El Salvador has made a number of conservation commitments, including to establish a zonal organization to oversee conservation and restoration of the Rio Lempa watershed and declare 75,000 hectares of protected aquifer recharge zones throughout the watershed by 2044.
The successful execution of the deal adds to Clifford Chance’s well established track record of advising clients on cutting edge blended finance transactions for sovereigns and solidifies Clifford Chance’s position as a market leader in sovereign debt conversions and debt-for-nature swaps.
Clifford Chance partner Deborah Zandstra, who led on the transaction, said “We are thrilled to have advised J.P. Morgan on such a landmark transaction for El Salvador and on the first sovereign debt for nature transaction for water security and conservation, building on previous debt for nature swaps and blended finance transactions we have advised on. The successful close of the transaction with multiple parties was facilitated by our ability to bring together a cross practice/ cross border team and speaks to the strength of our expertise in this field.”
Deborah Zandstra was assisted by a core team comprising of partner Jon Zonis, senior associates Sarah Cheng, Lucia Ferrer and James Kelton, and associates Alexandra Machado and Teninlanimi Owolabi as well as trainees Gerry Nauta-Bluer, Hannah McLellan and Liam Woodward.
The team were further assisted by lawyers across the Clifford Chance network, including partners Jeff Berman, Jose GarcĂa Cueto, Avrohom Gelber, Darren Littlejohn and Andrew Young, counsel AndrĂ©s Berry and Young Kim and associates Tom Dyer, Isabel Hager-Johnson and David Rondon.
Louise Keary and Andrew Whelan advised the agency parties and Daniel Winick and Xiaowen Zou advised the lender representative.
