I just recieved this from an international banker friend of mine in London. It was released Friday and will probably be in today's local news. Also, he tells me the Aerodom deal (and Samana's el Catey airport) is dead in the water until all this is resolved.
The following is a press release from Fitch Ratings:
Fitch Ratings-New York-October 24, 2003: Fitch Ratings, the international
rating agency, today downgraded the ratings on the Dominican Republic's
foreign
and local currency obligations to 'B' from 'B+'. The outlook remains on
Rating
Watch Negative.
The action reflects liquidity concerns due to continued pressures on the
sovereign's slim foreign exchange reserve position. In addition, Fitch
remains
concerned about the availability of multilateral funding over the coming
year
due to unresolved issues in the electricity sector. Foreign exchange
reserves
have fallen to US$520.8 million as of the end of September 2003 from
US$583.1
million as of end July, in spite of an infusion of US$123.5 million from
the
IMF in early September as part of its US$618 million two-year Stand-By
Arrangement approved on Aug. 29.
The Dominican authorities have reportedly agreed to an initial US$15
million
payment (in addition to future payments) to Spanish electricity company
Union
Fenosa to repurchase electricity distribution companies Edesur and
Edenorte, a
transaction which would further pressure external liquidity and public
finances, and perhaps put at risk future IMF and related multilateral
disbursements that are dependent upon IMF support. Already, it appears that
this transaction has resulted in a delay in the Stand-by review and a
disbursement of US$61.7 million which was supposed to have occurred on Oct.
15.
With US$504.3 million in public sector medium and long-term debt
amortizations
due next year, the Dominican Republic can ill afford to lose multilateral
financing.
Disputes involving government entities in the power sector could
potentially
result in other contingent liabilities to the sovereign. The Compania de
Electricidad de San Pedro de Macoris project involves a political risk
guarantee (PRG) from the Inter-American Development Bank, which if
activated
because of a failure of the government to meet its guarantee of the power
purchase agreement, would compromise sovereign creditworthiness. In the
event
the PRG is activated, US$70 million would become immediately payable to the
IDB. If the IDB does not convert this amount into a loan, the Dominican
government would have 30 days to make the payment to the IDB. In the event
the
government fails to make payment, it would be in non-accrual status with
the
IDB and all new financing as well as amounts pending disbursement under the
existing portfolio would cease.
When the sovereign's ratings were initially assigned, Fitch warned that
continued financial system weakness, combined with a lack of progress on
the
reform front and further pressure on the Dominican Republic's modest
foreign
exchange reserves, could have a negative impact on the country's sovereign
ratings. In spite of a long period of strong economic growth, which
resulted in
comparatively strong external and public sector debt indicators, the
Dominican
Republic's ratings reflected Fitch's concerns about the deterioration of
the
financial system's operating environment due to the collapse of Banco
Intercontinental.
While it appears that the government has made some progress in addressing
financial system weaknesses, new concerns have arisen due to electricity
sector
issues. Fitch is concerned that these problems have the potential to
disrupt
the availability of multilateral financing as well as create other
contingent
liabilities to the sovereign.
Although public sector and external debt (including private sector) are
expected to increase to 50% of GDP and 41% of GDP, respectively, by the end
of
2003, this is still low relative to other sovereigns in the 'B' rating
category. In addition, debt service is low relative to peers as more than
70%
of the debt is due to multilateral and bilateral creditors and benefits
from
concessional terms, which leaves Fitch to believe that meeting the
sovereign's
financial requirements is manageable as long as multilateral support
continues.
In the coming days and weeks, Fitch will continue to monitor the
Dominican
Republic's discussions with the IMF, including additional delays in future
disbursements, as well as developments in the electricity sector that could
result in additional public finance pressures. The loss of multilateral
support
would be an immediate cause for a downgrade.
(END) Dow Jones Newswires
10-24-03 1706ET(AP-DJ)--10-24-03 1706EDT
The following is a press release from Fitch Ratings:
Fitch Ratings-New York-October 24, 2003: Fitch Ratings, the international
rating agency, today downgraded the ratings on the Dominican Republic's
foreign
and local currency obligations to 'B' from 'B+'. The outlook remains on
Rating
Watch Negative.
The action reflects liquidity concerns due to continued pressures on the
sovereign's slim foreign exchange reserve position. In addition, Fitch
remains
concerned about the availability of multilateral funding over the coming
year
due to unresolved issues in the electricity sector. Foreign exchange
reserves
have fallen to US$520.8 million as of the end of September 2003 from
US$583.1
million as of end July, in spite of an infusion of US$123.5 million from
the
IMF in early September as part of its US$618 million two-year Stand-By
Arrangement approved on Aug. 29.
The Dominican authorities have reportedly agreed to an initial US$15
million
payment (in addition to future payments) to Spanish electricity company
Union
Fenosa to repurchase electricity distribution companies Edesur and
Edenorte, a
transaction which would further pressure external liquidity and public
finances, and perhaps put at risk future IMF and related multilateral
disbursements that are dependent upon IMF support. Already, it appears that
this transaction has resulted in a delay in the Stand-by review and a
disbursement of US$61.7 million which was supposed to have occurred on Oct.
15.
With US$504.3 million in public sector medium and long-term debt
amortizations
due next year, the Dominican Republic can ill afford to lose multilateral
financing.
Disputes involving government entities in the power sector could
potentially
result in other contingent liabilities to the sovereign. The Compania de
Electricidad de San Pedro de Macoris project involves a political risk
guarantee (PRG) from the Inter-American Development Bank, which if
activated
because of a failure of the government to meet its guarantee of the power
purchase agreement, would compromise sovereign creditworthiness. In the
event
the PRG is activated, US$70 million would become immediately payable to the
IDB. If the IDB does not convert this amount into a loan, the Dominican
government would have 30 days to make the payment to the IDB. In the event
the
government fails to make payment, it would be in non-accrual status with
the
IDB and all new financing as well as amounts pending disbursement under the
existing portfolio would cease.
When the sovereign's ratings were initially assigned, Fitch warned that
continued financial system weakness, combined with a lack of progress on
the
reform front and further pressure on the Dominican Republic's modest
foreign
exchange reserves, could have a negative impact on the country's sovereign
ratings. In spite of a long period of strong economic growth, which
resulted in
comparatively strong external and public sector debt indicators, the
Dominican
Republic's ratings reflected Fitch's concerns about the deterioration of
the
financial system's operating environment due to the collapse of Banco
Intercontinental.
While it appears that the government has made some progress in addressing
financial system weaknesses, new concerns have arisen due to electricity
sector
issues. Fitch is concerned that these problems have the potential to
disrupt
the availability of multilateral financing as well as create other
contingent
liabilities to the sovereign.
Although public sector and external debt (including private sector) are
expected to increase to 50% of GDP and 41% of GDP, respectively, by the end
of
2003, this is still low relative to other sovereigns in the 'B' rating
category. In addition, debt service is low relative to peers as more than
70%
of the debt is due to multilateral and bilateral creditors and benefits
from
concessional terms, which leaves Fitch to believe that meeting the
sovereign's
financial requirements is manageable as long as multilateral support
continues.
In the coming days and weeks, Fitch will continue to monitor the
Dominican
Republic's discussions with the IMF, including additional delays in future
disbursements, as well as developments in the electricity sector that could
result in additional public finance pressures. The loss of multilateral
support
would be an immediate cause for a downgrade.
(END) Dow Jones Newswires
10-24-03 1706ET(AP-DJ)--10-24-03 1706EDT
