President Leonel Fernandez announced yesterday that the government has contracted the Wall Street firm Morgan Stanley to restructure the sovereign bonds in order to move on to the restructuring with the Paris Club. Morgan Stanley, along with JP Morgan, participated in the sovereign bond offering of US$500 million in October 2001 that mature in 2006. The JP Morgan and Salomon Smith Barney handled the US$600 placement (due 2013) in 2003.
An industry insider explained that this is not seen as a conflict of interest. The source explained that if anything, in the case of the Dominican Republic it is actually helpful, from a liability management perspective, to work with a bank that might understand who the initial holders of such debt are and under what conditions those holders can choose to participate in an exchange. If anything, a broker consulted explained that this is a very important point in order for an exchange to be successful from a participation level, such as has been learned from the Argentina debt tender offer/exchange.
The decision appears to have been to secure the firm that provided the best pricing and guidance around the potential external debt exchange, said the source.
The restructuring is still pending approval in the Chamber of Deputies.