Bear Stearns Central America and Caribbean Month Report issued 6 October reveals that the DR has missed another coupon payment (on its 2006 bond) and is again making use of the 30-day grace period.
The practice of postponing payment to the ultimate deadline was begun in the final days of the Mejia administration and Franco Uccelli, reporting on the DR for Bear Stearns, comments that it has become the usual, and “the market seems to have hardly noticed.”
On the positive side he mentions the enactment of the fiscal reform. Furthermore, he writes that the Central Bank is looking to capitalize on increased local confidence to stem the burden of servicing the country’s quasi-fiscal debt by extending the maturities and indexing the interest it pays on its US$3 billion in outstanding CDs.
In his analysis of happenings in the month of September, Uccelli also mentions that after meeting with IMF officials in Washington, a Dominican government delegation was scheduled to travel to France to conduct another round of negotiations with the Paris Club. “We believe that the outcome of such talks could have a strong bearing on the potential restructuring of the country’s commercial debt.”
Meanwhile, he points out that the DR bonds have rallied significantly during the past two months and yields have tightened, validating the outperform recommendation Bear Stearns has had on the credit. “However, our model suggests that prices are now at levels that represent full value under a market-friendly restructuring scenario,” he writes. Bear Stearns has revised its recommendation on the DR to “marketperform.”