Franco Uccelli of Bear Stearns reports on the possibility commented in the local press that the government would extend the maturities of its 2006 and 2013 bonds by two and five years respectively, as part of the bond restructuring. Uccelli reports, having confirmed with reliable government sources, that this information is incorrect. The length of the maturity extensions will be the result of negotiations with bondholders, a process that has not formally started, his sources say.
“We believe that the Dominican government will seek to extend its bond maturities as much as possible (that is, by more than two years), and are uncertain if a two-year extension of the 2006 maturity would be sufficient to comply with the comparability of treatment requirement imposed on the DR by the Paris Club,” he writes in his 9 February update.
Uccelli explains that the Dominican team commissioned to negotiate the restructuring of the country’s external debt is currently conducting a round of negotiations with commercial banks in Europe, and will follow at a later date with negotiations with bondholders. The Fernandez administration introduced to congress a bill last week requesting formal authorization to restructure the country’s bonds. At the time of writing, the bill had yet to be sent set to the proper legislative committee for consideration. The country’s bond restructuring requires congressional approval since the process would entail the issue of new bonds to be exchanged for the old ones.
The Bear Stearns analyst concludes that the bottom line is that reports of a two-year extension on the 2006 bond are inaccurate. The length of a likely extension will be the result of a process of negotiation that has yet to commence.