DomRep starts Euroclear debut, adds 2048s
February 9, 2018 |
Caribbean sovereign gathers more than $800m in local currency bonds, targets $1bn on the longer end, sources say
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The Dominican Republic launched a DOP40bn ($817m) 2023 local currency bond on Thursday, marking its debut under the Euroclear format. The sovereign issuer also launched a $1bn 30-year cross-border bond, sources confirmed.
Citi and JPMorgan, along with local firm Banreservas started price talk in the mid 6% area on the 2048 dollar tranche, while the Euroclear note was set at 8.95% area. Leads tightened the longer-dated bond to between 6.4% and 6.5% at guidance, while the five-year Euroclear lowered to 8.9% area.
Leads launched the dollar portion at 6.5% and released the local currency effort at 8.95%, sources confirmed. By the time LatinFinance went to press, sources had not confirmed the final pricing of the transaction.
One bond buyer described the Dominican Republic's curve at the shorter-end as "all over the shop." But he deemed the 2048 tranche "fair," given the sovereign's curve was hovering around 6.2% and 6.3% in yield terms.
"We like the story and we think there is potential for this local instrument to do well," a second investor said. He also said the Euroclear debut needed to provide investor value, in order to justify rolling out a new instrument.
"It is the inaugural issue in local currency, so you want international investors to experience value, since [local currency] might put them off," he said of the risk factor. "[Dominican Republic] does not want to put people off on the first attempt because if it is perceived not to be fair, it could give you problems down the line."
The same buyer said he wanted more juice on the dollar tranche, despite the Ba2/BB-/BB- rated sovereign's solid fundamentals.
"It looks like they struggled to tighten it more, but it is hard to say if it is because of all the market jitters over the past few days," one DCM banker away from the transaction said.
Proceeds will go towards general purposes and to partially finance its 2018 budget.
The Dominican Republic tapped the cross-border bond market in June, adding $500m to its 5.95% $1.2bn 2027 bonds at 5.1%.