NEW YORK, April 30 (IFR) - The Dominican Republic scored a home run on Thursday raising US$1bn through a dual-tranche bond reopening that was priced with just 5bp to 12.5bp in new issue premium.
The Caribbean oil importer’s bonds, rated B1/B+/B+ (Moody‘s; S&P; Fitch), attracted about US$2.5bn in orders from investors keen to take exposure to a sovereign that benefited from this year’s dramatic declines in crude prices.
Priced with a yield of 5.125%, the US$500m reopening of 5.5% 2025s came with a premium of around 12.5bp against the 5% mid-market quotes for the older bonds in the secondary market earlier on Thursday.
Meanwhile, the longer-dated US$500m reopening of the 6.85% 2045s, which was priced at 6.5%, came at an even tighter concession of just 5bp versus older bonds quoted at 6.45%.
“It is a story that people like,” said a US-based investor. “Tourism numbers are growing at double digits and lower oil prices have helped them a lot.”
The country’s economy enjoyed 7.3% growth rate last year and is expected to expand another 5% in 2015, according to Lucila Broide, director of emerging markets fixed-income at Oppenheimer & Co.
The deal is a reopening of bonds originally issued as part of a US$2.5bn sale in January, the country’s largest ever bond sale.
Proceeds on that occasion were largely used to retire a US$4bn PetroCaribe loan by paying Venezuelan state-owned oil company PDVSA just US$1.93bn.
“The PetroCaribe operation improved the debt trajectory of the country which, according to our estimates will end 2015 at 37.3% of GDP, almost 2.3 percentage points lower than originally projected,” said Broide.
After covering the PetroCaribe loan, the government had around US$580m in remaining proceeds, leaving it with another US$1.3bn to raise to cover this year’s financing gap, said Broide. The bonds issued today would cover that gap.
Leads Bank of America Merrill Lynch and JP Morgan acted as leads on the issue, whose total size was capped at US$1bn. (Reporting By Paul Kilby; Editing by Shankar Ramakrishnan)