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News from the Dominican Republic as of
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Dominican Republic hires Barclays, Citigroup for bond sale
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| Published on Wednesday, October 14, 2009 | Email To Friend Print Version
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By Veronica Navarro Espinosa
SANTO DOMINGO (Bloomberg) -- The Dominican Republic has hired Barclays Plc and Citigroup to arrange the country’s first international dollar bond sale in more than three years.
The government may sell as much as $600 million of bonds, said Roberto Cabanas, head of general financing at the Public Credit Office. The country last sold dollar bonds abroad in 2006, a year after defaulting on $1.1 billion of debt.
The Dominican Republic is seeking to tap overseas debt markets after the International Monetary Fund said Oct. 6 it reached an agreement with the country in principle on a $1.7 billion loan. The country’s benchmark yields have tumbled this year as the government negotiated with the Washington-based lender and the global economic recover fueled demand for higher- yielding assets.
The Dominican Republic’s yields relative to U.S. Treasuries “collapsed when they went to the IMF at the end of August,” said Boris Segura, a Latin American analyst at RBS Securities Inc. in Stamford, Connecticut.
The extra yield investors demand to own Dominican Republic dollar bonds instead of Treasuries has narrowed to 4.45 percentage points from 8.33 points at the beginning of August and 16.05 points on Dec. 31, according to JPMorgan Chase & Co.
The Dominican Republic needs to get Congressional approval before it can issue the bonds, Cabanas said. The country may sell the notes as soon as November, according to RBS’s Segura.
The IMF agreement, valid for 28 months, requires approval from the lender’s Executive Board. Under the accord, the Dominican Republic is committing to a primary deficit of the combined public sector of 0.8 percent of gross domestic product this year, which falls to zero in 2010 and swings to a 2 percent surplus in 2012.
The Dominican Republic’s economy will grow between 0.5 percent and 1.5 percent this year, down from 5.3 percent in 2008, amid a drop in exports, tourism and remittances caused by the global crisis, according to the IMF.
In December, the country’s credit rating was cut one level by Standard & Poor’s on concern a slowing economy will hurt the government’s finances. The government’s long-term debt rating was lowered to B, five levels below investment grade, from B+. The country has a B2 rating from Moody’s Investors Service.
In 2005, the Dominican Republic’s rescheduling of $1.1 billion of debt was deemed a default by ratings companies. The country had been struggling to meet debt payments since 2003, when the government was forced to assume control of Banco Intercontinental SA after the bank lost over $2 billion through fraud and bad loans. | | | | Reads : 1110 | | | |
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