Goldman Sachs update on bonds

Geoffrey Gottlieb, who analyzes the Dominican Republic market for Goldman Sachs, forecasts an imminent restructuring of Dominican bonds. “Investors holding Dominican bonds will be in a very different place in 30 days,” he writes in a start of year release. “Between now and then, the authorities hope to secure approval of a new US$1 billion IMF program (now on the IMF schedule for January 21) and put forth a proposal to restructure sovereign debt (the latter may stumble into February) that will include an exchange of sovereign bonds,” he reports.

Gottlieb says that a rally is likely amid restoration of relations with the IMF but that “Dominicans will not be out of the woods until they secure participation in a bond exchange.”

He expresses his confidence that the bond exchange will propose extending the 2006 bullet but in his understanding the authorities have not made up their mind on whether to ask for capitalization of 2005 coupon payments. Most of the 2005 relief from external restructuring will come from commercial banks and the Paris Club. He advises holders of Dominican Bonds to get ready to assess whether participation in the exchange makes sense at these price levels and given the state of Dominican economic recovery.