DR Bonds

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privateboles

New member
Jul 11, 2003
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I found a website where a DR business is offering 100,000 DR peso bons for 60,000 DR. The selling point is supposed to be the fact that it is a government bond. The deal is to pay 60,000 DR for the 100,000 DR government bond. It is supposed to pay out quarterly interest payments of 1750 for 9 more payments up to the maturity date which is November 2005 and at that point, you would receive the 100,000 DR.

Simple math:

You pay RD$ 60,000 per bond, and here's what you get:

Date Amount
Sep/01/2003 RD$ 1,750
Dec/01/2003 RD$ 1,750
Mar/01/2004 RD$ 1,750
Jun/01/2004 RD$ 1,750
Sep/01/2004 RD$ 1,750
Dec/01/2004 RD$ 1,750
Mar/01/2005 RD$ 1,750
Jun/01/2005 RD$ 1,750
Sep/01/2005 RD$ 1,750
Nov/09/2005 RD$ 100,000

I would pay 60,000 DR now at 34 DR per 1USD So I would pay $1764 for the bond. I would receive 115750 DR total for the bond based on the above table. If the DR peso crashes to 50 DR between now and Nov 2005 the 115750 I would receive would be worth $2315 for a profit of $551 or 15.6%APR if my math is correct.

The questions I have are:

Does anyone have any knowledge about these bonds and if they are legitimate?

Anyone have any info on the company

Claudio G?mez
Asesores Profesionales Integrados, S.A.
Av. Jos? Contreras 156
La Julia, Santo Domingo
Dominican Republic
http://www.aprisa.biz


Your input would be greatly appreciated.
 
D

DCfred

New member
Jun 19, 2003
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Never heard of the company. The only experience I have with investment instruments in the DR were "Certificados de Acreencia" from BHD, back in 96/97, making around 24%. I believe it renewed every six months and interest was paid monthly.
 
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DeeDR

New member
Mar 27, 2003
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I have two such bonds ("Tesoro Nacional", Ley 104). The payment information looks accurate except for one thing: You forgot to mention the final interest payment of 1,166.66 pesos, which will be made on (or after) Nov 1, 2005. Also, you should know that these dates are guidelines only, as most interest payments are made with a delay of a few weeks (or sometimes months).

Each of the bonds came with 23 interest coupons. There are only 10 left now as the others have been paid. When the time for each coupon comes, you go to the Banco de Reservas and get the interest payment in cash.

I bought these bonds before the devaluation so it looks like I'll end up losing quite a bit of money. If you buy them now and the peso doesn't go beyond 50, it should be a good deal.

DeeDR
 
M

mondongo

Bronze
Jan 1, 2002
1,533
6
38
DeeDR, do you know if ordinary folks can buy the bonds directly from the Central Bank? Any idea what the 1-year bond interest rate (couplon rate) is for new issues?

thanks

PS Some bonds are bought at discount and then pay the face value at maturity: you pay 60 now, collect 100 later with no interest payments in between.....other bonds pay you a regular interest rate and then give you the face value at maturity: you pay 100 now, get 100 later, but collect the coupon rate in between. the bond described by the original post seems to be a hybrid of the two...
 
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DeeDR

New member
Mar 27, 2003
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mondongo, as far as I know, these bonds have nothing to do with the Central Bank. Instead, they are issued directly by the government, and are administrated by the Banco de Reservas.

Also, I believe these bonds were never offered directly to the public. Instead, they were used by the government to pay its debts, or some of them for that matter. (The bonds are called "Bono para el pago de la deuda publica interna" - Bonds for the payment of the internal public debt).

Someone I know (a friend of a friend) had some property expropriated from the government so they could build a highway. He was compensated with bonds. The people who get these bonds from the government, can sell them at a discount on the secondary market. Or they keep them until the expiration date to get the full amount.

As for the Central Bank, what they are issuing are "certificates", which, as far as I know, aren't backed by anything in particular, other than the Central Bank's ability to print more money. These certificates are available directly to ordinary folks at the Central Bank.

(That's the way I see it as someone who doesn't spend too much time on these matters. So, correct me if I'm wrong or if you can add anything to this information.)

DeeDR
 
R

ricktoronto

Grande Pollo en Boca Chica
Jan 9, 2002
4,837
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Optimism Abounds

DeeDR said:
If you buy them now and the peso doesn't go beyond 50, it should be a good deal.
DeeDR
Click to expand...

I think that expecting no more devaulation than 34 --> 50 in the next 2 years and 5 months is pretty optimistic. Since nobody expected 17->34 in less than one year, it is possible the rate of evaporation of value may continue until 2005. Certainly until elections.

If one was to buy these bonds, one should determine at what point does the peso devaluation mean that you are earning <B>less</b> than a USD$ deposit for the same 2 years and 5 months?

15.6% APR is in pesos and if USD$ deposits say, earn 6 to 8% p.a. now you have a whole 7.6% p.a. as your safety margin - I would think a peso play right now is darn foolish. Builiding an investment strategy with an imaginary cap of the value of the peso 29 months out especially.
 
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