On May 29, 2019, the Government of the Dominican Republic placed bonds in the international capital markets for a total equivalent amount of USD2,500 million, due to the issuance of Dominican peso (DOP), 7 years bonds for DOP50,523 million (US$1,000 million), and a 30-year USD bond for USD1,500 million.
This issuance is part of the Annual Financing Plan contemplated in the National Budget for 2019 approved by Law No. 61-18, which approves the General State Budget for the year 2019, as well as by Law No. 64-18 on Public Debt Securities. The resources received from these placements will allow the implementation of the public investment plan of the year, and meet the Government’s obligations.
The DOP issuance is in line with the Dominican Government's strategy to continue reducing the exposure to foreign exchange variation and extending the portfolio’s maturity. The demand of this instrument allowed issuing a higher volume and longer maturity compared with the first DOP bond issued externally of DOP40,000 million at 5 years, reflecting the investor’s confidence in the economic growth of the country and the stability of the Dominican currency. This placement was made at an interest coupon rate of 9.75%.
The 30-year issuance at an interest rate of 6.492%, the lowest issued by the Dominican Republic for this maturity, reflects the great confidence of investors in the future of the Dominican economy.
The conditions obtained in these transactions will allow extending the average term to maturity from 9.0 years to 10.0 years, thus reducing the refinancing risk of the debt, mitigates the exchange rate risk as it includes a proportion in local currency, maintaining the average interest rate levels of the portfolio.
Despite the volatility that has characterized the international financial markets in recent days, the placement was successful and the total demand for the Dominican Sovereign Bonds was much higher than the amount offered by the country.
Some 69 accounts of investors from around the world demanded the DOP bonds with a total demand of DOP72,000 million, around one and a half times the amount placed. The bond in USD had demand for USD4,000 million, more than two times the amount of the issue, on the part of about 196 investor accounts, reflecting a considerable interest for bonds of a country with a sovereign rating of Ba3/BB-/BB-.
This reflects the excellent perception of investors of the Dominican Republic's positioning as one of the most dynamic and growing Latin American economies, in a context of low inflation, exchange rate stability and balance in the fiscal and external accounts.
This transaction was led by the Minister of Finance, coordinated by the Public Debt Office with the support of the technical staff of the Ministry. The structuring banks were J.P. Morgan and Bank of America Merill Lynch.