DR Eyes Domestic Bond Issuance

The Dominican Republic is proposing to issue $500m in the local bond market, according to government filing. If approved by congress, the government would issue the USD-denominated bonds in multiple series, with a maturity of at least 5 years and a coupon of up to 7%. Proceeds will be transferred from the finance ministry to state-owned electricity companies. “The deficit remains high due to higher international oil prices so it is necessary to increase transfers to state utilities to meet their commitments with generators,” the finance ministry says. The government had been considering a 10-year international sale of $500m. “It is yet unclear to us how ample demand will be for $500m in relatively short-dated local bonds paying a coupon of 7%. The issuance of debt to finance subsidies to the electricity sector validates our concerns that the country’s fiscal standing has weakened in the first half of the year beyond the point where the government can reallocate budget resources to cover unexpected needs,” JPMorgan says in a research report. The republic’s last issue was a $250m retap of its 7.500% 2021 bonds, done in November at a 6.875% yield.