How It All Wend Down: Cap Cana completes largest corporate bond issue in DR history
Valued at US $250 Million in 7-Year Bonds at 9.62%, this transaction is considered to be the largest issue by a private corporation in the country.
Monday November 13, 7:05 pm ET
Santo Domingo.? Cap Cana has just completed the
largest international corporate bond issue in the history of the Dominican Republic,
at the lowest interest rate ever for a Dominican company in the international arena.
The company issued $250 million US dollars in 7-year bonds at a rate of 9.62%. This is the first time that a Dominican company is financed in the international market at a rate below 10.87%.
In addition, Cap Cana is the
only corporate issuer from the Dominican Republic to receive an international B rating by risk assessor Fitch Ratings, making it the highest ranking ever granted to company from this country.
Likewise, Moody's Investors Services gave it an international rating of B3. The success and low cost of the bond issue reflect the perception of reduced risk among foreign investors, the confidence inspired by its executives and the country's robustness for the development of world-class projects such as Cap Cana.
"We are very pleased to see Cap Cana, one of the companies in our consortium, issue bonds worth $250 million US dollars, this demonstrates its unequivocal business drive and its already well-deserved prediction as a successful project, which can only be compared to some of the most select destinations in the world," declared Abraham Hazoury, President of Grupo Abrisa.
"With this new boost of fresh capital, Cap Cana ensures it will continue on its accelerated rhythm of growth and will certainly fully achieve its goals," pointed out Ricardo Hazoury, President of the Cap Cana Board of Directors.
With the funds obtained through this bond issue, Cap Cana will pay in full its debt to the national banks, by making a payment of US $62.3 million. The remaining net funds will be used to speed up the project's development.
This is a pioneering transaction in many ways. Cap Cana, along with financial consultant and bond issue manager, Bear, Stearns & Co., developed an innovative financing structure with a level of complexity and sophistication never seen before in international markets.
The structure provides investors with an important level of protection by integrating a dynamic system of guarantees, which adjust as the construction project moves forward. It provides Cap Cana an extraordinary level of flexibility that will enable it to drastically increase its levels of sales, provide better payment plans for customers, and significantly increase the project's development speed.
The transaction's main innovation is the effective combination of securitization processes with project financing. There is an important construction component, which enables the creation of an attractive structure for both the investors and the company.
Funds from the bond issue will be deposited in an escrow account and will be disbursed for construction purposes, under de supervision of international firm
The Louis Berger Group Inc., which will act as an independent
engineering company.
"The quality of construction at Cap Cana is at par with the highest international standards," said Carlos Marcenaro, Senior Vice-President of The Louis Berger Group Inc. Interest generated by this transaction, as evidenced by a high demand of more than $100 million US dollars, enabled an
increase in the bond issue from US $200 million to US $250 million, as well as a reduction in the interest rate to unprecedented levels for a Dominican corporate issuer.
This significant success, along with the innovative financial engineering, has spurred rumors around international financial circles that it may be nominated Transaction of the Year in Latin America.
CB Richard Ellis, the largest international real estate services company in the world, rated the Cap Cana property at US $1.11 billion. Jorge Hurtado, Director at CB Richard Ellis, pointed out that "Cap Cana is a development that stands out because of its ambitious dimensions; the combination of beaches, golf and a marina, and the indisputable beauty of its surroundings.
The project's distinctiveness, along with the prices it has achieved, reflects an impressive proposition of added value equal to the top destinations in the Caribbean." Given this high value, even after this bond issue, Cap Cana's debt levels will remain relatively low, since its total debt represents less than 30% of the project's worth.
Following its high-profile track of partnering with some of the most prestigious firms around the world, Cap Cana resorted to Bear, Stearns & Co. Inc. as the exclusive agent for the bond issue; and to
Simpson, Thacher & Bartlett and Mejia, Armenteros & Ortiz, as legal counsel in the United States and the Dominican Republic, respectively. In turn, Bear Stearns secured the legal services of Thacher Profit Wood in the United States, and those of Squire Sanders Dempsey Pena Prieto & Gamundi in the Dominican Republic.
KPMG Dominican Republic audited the company's financial statements, validating the data contained in the Offer Memorandum.
"We feel highly honored to have the opportunity to be part of a financial milestone in Dominican history," said Jose N. Cardona, Executive Partner at KPMG.