Franco Uccelli of Bear Stearns reports today that the Dominican Republic reopened last night its recently completed bond exchange offer in hopes of securing a higher rate of participation among holders of the old, exchanged bonds. He explains that the principal objective of the reopening is to help the country narrow its financing gap for 2006. The terms of the reopening are the same as those of the original exchange, and holdouts will now have until 14 July (extendable at the government’s discretion) to tender their old bonds.
Uccelli specifies that around 91% of the old 2006 bonds and 96% of the old 2013 bonds were tendered when the original exchange transaction settled six weeks ago and US$455 million and US$575 million in new 2011 and 2018 bonds were issued, leaving approximately US$45 million in old 2006 and US$25 million in old 2013 bonds outstanding.
In his report, he states that the Fernandez administration is determined to reduce the amount of outstanding untendered bonds, particularly of those maturing in September 2006, so as to lessen its near-term financing needs. He mentions that in the case of the original offer to exchange, U.S. retail investors will be excluded from participating in the reopening of the transaction, given that the operation is not SEC-registered (the new bonds are listed on the Luxembourg Stock Exchange). “We view this as an opportunity for those who opted not to participate in the bond exchange the first time around to swap their old bonds for new, more liquid instruments with greater price appreciation potential,” concludes Uccelli in his 28 June report.