Fitch says PetroCaribe deal benefits Dominican Republic finances

Fitch says PetroCaribe deal benefits Dominican Republic finances

Thursday, February 05, 2015

Print this page Email A Friend!




NEW YORK, USA (CMC) — International ratings agency Fitch says the Dominican Republic Government's transaction to redeem debt with Venezuela's State-owned company (PDVSA) will have a positive impact on the country's debt and budget finances.


On Wednesday, Fitch Ratings said the deal reduces the country's public debt burden, lowers its interest costs and extends its average maturity.


"This is the first transaction under the new public debt law approved by congress last November, which grants the fiscal authorities greater flexibility to tap international bond markets and conduct liability management operations," Fitch Ratings said.


It said the Dominican Republic used US$1.9 billion of the proceeds of its US$2.5 billion global bond issuance on January 20 to redeem US$4 billion in outstanding debt accumulated with PDVSA under the PetroCaribe agreement from 2005-2014.


According to the ratings agency, the transaction had a principal haircut of 52 per cent and a discount rate of 9.5 per cent, which reduced it by US$550 million in net present value.


It said the significant discount led to a decrease of 3.3 per cent of Gross Domestic Product (GDP) in public debt and reduced annual debt-servicing costs by US$100 million.


Despite these benefits, Fitch expects the Government's debt to approach 37 per cent of GDP and interest burdens to reach three per cent of GDP by 2016 "as increased external borrowing to fund investments in the electricity sector and mandatory interest payments to recapitalise the central bank develop".


Fitch said the Dominican Republic's capacity to access international capital markets at favourable terms facilitated the transaction.


Fitch upgraded Dominican Republic's ratings to "B+" in November 2014.



Now you can read the Jamaica Observer ePaper anytime, anywhere. The Jamaica Observer ePaper is available to you at home or at work, and is the same edition as the printed copy available at http://bit.ly/epaper-login


ADVERTISEMENT




POST A COMMENT

HOUSE RULES

1. We welcome reader comments on the top stories of the day. Some comments may be republished on the website or in the newspaper � email addresses will not be published.

2. Please understand that comments are moderated and it is not always possible to publish all that have been submitted. We will, however, try to publish comments that are representative of all received.

3. We ask that comments are civil and free of libellous or hateful material. Also please stick to the topic under discussion.

4. Please do not write in block capitals since this makes your comment hard to read.

5. Please don't use the comments to advertise. However, our advertising department can be more than accommodating if emailed: advertising@jamaicaobserver.com.

6. If readers wish to report offensive comments, suggest a correction or share a story then please email: community@jamaicaobserver.com.

7. Lastly, read our Terms and Conditions and Privacy Policy



comments powered by Disqus
ADVERTISEMENT

Poll

ADVERTISEMENT
ADVERTISEMENT

Today's Cartoon

Click image to view full size editorial cartoon
ADVERTISEMENT