Geoffrey Gottlieb of Goldman Sachs brokerage firm in the 5 October Emerging Markets Daily Comment focuses on the DR and mentions that bondholders have formed a steering committee to assist in any eventual debt restructuring. He believes this could happen in December or January, before the January coupon payment date. Gottlieb says that it is still unclear what portion of 2004 arrears will be pushed into 2005. “If the authorities can avoid capitalizing interest on bond payments, we assume they would because this step makes any deal less attractive, all else being held equal. However, we think the financing looks sufficiently difficult that this is unlikely.”
He comments on the return of the Dominican delegation that traveled to Washington for meetings with the IMF. He comments that the issue holding up the resuming of the IMF program is financing in 2005 where a gap of several hundred million dollars persists.
Gottlieb says that Goldman Sachs sees some form of restructuring as an inevitable portion of the gap-filling strategy but it remains unclear whether this would be adequate. “The US$100 million in bond interest payments alone would be insufficient and in any case, we do not see the government capitalizing 100% of the interest payments. Non-bond private sector debt service is considerable at US$160 million and this offers some possibilities,” he explains. He concludes: “But the authorities may also go back to the Paris Club where there is roughly US$150 million in claims that could be restructured (pre-cutoff date debt service)”.