22 de enero de 2016 / 15:31 / en 2 años

Dominican Republic order books swell close to US$3bn

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.

“They benefit hugely from this low oil price environment ... Fundamentals are (also) supportive, with growth in the 5% region this year.”

The Dominican Republic was breaking a brief lull in issuance out of the region as broader markets enjoyed a second day of strength thanks to a rally in crude oil prices.

It is the third cross-border bond sale out of Latin America in what has been a slow start to the year.

Investment grade-rated sovereigns Mexico and Chile raised close to US$5bn equivalent between them last week.

“Sovereigns remain the entry point for investors into this market, and the Dominican Republic is offering a bit of juice, which is what people are looking for,” said a banker away from the deal.

“Mexico did better than Chile, because it pays better.”

Proceeds are slated for general purposes, including the partial financing of its 2016 budget.

The Dominican Republic’s 144A/Reg S deal is rated B1/BB-/B+. BanReservas is acting as co-manager. (Reporting by Paul Kilby; Editing by Shankar Ramakrishnan and Marc Carnegie)

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