Beat Siegenthaler of Commerzbank writes that there is positive news in the Standard & Poor’s last week downgrading of the DR’s foreign currency, following the government acknowledging arrears on commercial bank debt. Siegenthaler writes that after the restructuring, the DR would be rated B, and that domestic confidence was likely to be boosted by sustained fiscal adjustment and improved expectations following the bond exchange. He also reports that the “already moderate” debt burden would fall further on robust growth projections of 4% for several years. He interprets that S&P seems to have a relatively positive view on the DR economy, and states that this is a position that Commerzbank fully shares.
Siegenthaler also reports that the other important piece of news over the past week was that on Friday the government asked the Congress to approve a bill allowing for the restructuring of the external sovereign debt. According to the bill, the maturities of the $2006 and $2013 would be extended by 2 and 5 years, respectively, to 2008 and 2018. “Again, this is in line with our expectations of a maturity extension without any haircut on principal or interest, as well as continued servicing on both bonds,” he writes. He comments that the coupon payment on the $2013 due on 23 January was made last week with a few days delay.
According to Siegenthaler, with a B rating, the DR would be on a level with credits such as Jamaica, Uruguay and Venezuela. But that looking at comparable bonds, the DR yields look high even after the recent rally.
Domrep $2018 (new 2013)10.6%Domrep $2008 (new 2006)10.7%
Jaman $20179.1%Jaman EUR20096.8%
Urugay $20157.6%Urugay $20117.4%
Venz $20189.2%Venz EUR20085.5%