Dominican Republic Sells Record $1.25 Billion of Bonds

The Dominican Republic sold a record amount of bonds in the nation’s first offering of 30-year dollar debt since 1994.

The Caribbean nation issued $1.25 billion of the securities due in 2044 at a yield of 7.45 percent yesterday while pulling a sale of five-year peso-denominated notes that officials were considering, data compiled by Bloomberg show. Goldman Sachs Group Inc. and JPMorgan Chase & Co. arranged the transaction.

After raising $1.5 billion in overseas bond markets last year, the Dominican Republic is taking advantage of its lowest borrowing costs since June. Proceeds of the new debt sale will be used to fund infrastructure projects and support other sectors of the economy, according to a person familiar with the offering who asked not to be identified because he’s not authorized to speak about it.

The yield on the Dominican Republic’s bonds due April 2024 was unchanged at 5.9 percent at 10:08 a.m. EST. It reached a 10-month low of 5.815 percent on April 8. The country’s dollar bonds have returned 4.8 percent this year, compared with 4.7 percent for emerging market debt, according to JPMorgan’s EMBIG index.

The country of 10.2 million people, which shares the island of Hispaniola with Haiti, is rated B1 by Moody’s Investors Service, or four levels below investment grade, and an equivalent B+ by Standard & Poor’s. The Dominican Republic hasn’t sold 30-year bonds since the aftermath of its restructuring orchestrated by then-U.S. Treasury Secretary Nicholas Brady in the early 1990s, according to data compiled by Bloomberg.

Debt Burden

The International Monetary Fund in March urged the government to adopt a fiscal program and create a system to automatically adjust electricity rates after the state energy company, known as CDEEE, received more than 43.7 billion pesos ($1 billion) in the 2013 budget. Economy Minister Temistocles Montas rejected those ideas and said the country would lower its debt burden of 48 percent of gross domestic product by “rationalizing spending.”

The Dominican Republic slipped five spots to 117th out of 189 economies in the World Bank’s annual “Ease of Doing Business” ranking. Barrick Gold Corp., which opened its $3.7 billion Pueblo Viejo mine in 2012, agreed to change its contract last year after President Danilo Medina said the original accord was “unacceptable” and the government began blocking some gold exports.

The Caribbean nation’s economy will expand 4.5 percent this year after growing 4.1 percent in 2013, Montas said in a February interview. Growth will be driven by investment in a $1.95 billion project to build two coal-fired electricity plants, along with increased economic activity in tax-free zones and tourism, he said.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE