Finally, the Ministry of Finance just allocated of USD 2.5 bn in global bonds

DOMINICAN REPUBLIC - In Brief 01 Jun 2019 by Pavel Isa

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As most of you probably know, and as we predicted in our last report, this week the Ministry of Finance allocated bonds in the international market for a total amount equivalent to USD 2.5 bn. The amount is USD 250 million above the indicative amount authorized by the 2019 budget law. That means that other financial sources, most likely multilateral financing, will be lower than expected. The allocation was made late compared to previous years. The Minister argued that they were waiting for the best time in a volatile context. However, not a few suspects that a little-known legal claim that a handful of citizens introduced questioning the legality of the law that approved the issuance, delayed it. The lawsuit was dismissed by a court a few weeks ago. In addition to the time it was made, the allocation had another novelty: of the total amount, the equivalent of USD 1 bn was made in DOP denominated bonds something unexpected for us. The remaining USD 1.5 bn was placed in USD denominated bonds. The titles denominated in USD have a maturity of 30 years. The agreed interest rate was 6.492%, very similar that achieved in 2018 for similar ones. The maturity of the bonds denominated in DOP was 7 years, and the interest rate agreed was 9.75%. The first issuance in DOP was in February 2018, the maturity of the securities was 5 years and the agreed rate was lower: 8.90%. The Ministry reported that total demand for DOP denominated titles was 1.5 times the value of the issuance, that the amount demanded for USD denominated bonds was 2.5 times the value of the placement, and that this placement extended the average maturity term from 9.0 years to 10.0 years, while contributing to re...