Dominican Republic order books swell close to US$3bn
By Paul Kilby
NEW YORK, Jan 22 (IFR) - Order books on the Dominican Republic's 10-year bond swelled to US$2.8bn on Friday as the Caribbean nation tested appetite for Latin America's first junk-rated issue of the year.
Leads Deutsche Bank and JP Morgan revised guidance to 6.875%-7.00% from very low 7% area, inciting a mixed reaction from the buyside.
Assuming the deal lands at the tighter end of that range, the borrower would offer a new issue concession of 37.5bp-40bp, according to bankers away from the deal.
While some described that as an obvious buy, other were less certain about how cheap the B1/BB-/B+ rated sovereign was coming as it looks to raise up to US$1.25bn.
"40bp is fair but it is certainly not a screaming buy," said Sean Newman, senior portfolio manager at Invesco. "Chile paid 30bp and Mexico 20bp, so you would think at minimum a high yield sovereign would have to pay north of 40bp."
The Dominican Republic is already trading flat or slightly tight to higher-rated peers like Costa Rica (BB/Ba1), whose 2025s were quoted Friday at a mid-market yield of around 6.60%.
That said, the Caribbean country has comparatively positive tailwinds behind it. As an importer of oil, the sovereign has benefited from the sharp decline in crude prices, while growth remains relatively robust.
"This is the reason why the Dominican Republic can come to market," said Newman. Continuación...