Dominican Republic to reopen bonds due 2018 to add $300 million

By Reshmi Basu

New York, Aug. 12 - The Dominican Republic plans to reopen its 9.04% bond due 2018 to add $300 million, according to a market source.

Local press has been reporting that the government will use the funds to pay off its debt with Spanish electricity company Union Fenosa.

The government intends to sign a memorandum of understanding with Union Fenosa that allows for four months to finish the transaction, according to an analyst note.

The analyst described the deal as a liability management move, since the country wants to retire 12% debt incurred because of the energy crisis of last year.

The country wants to replace the debt with new 2018 bonds, which would save $20 million annually in coupon payments.

Although it is a short-term negative for the bonds, it is a medium-term positive for the nation's fiscal accounts, said the analyst.

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