The Dominican Republic in $1.1 Billion Debt Restructuring

July 20, 2005

Cleary Gottlieb represented The Dominican Republic in restructuring approximately $1.1 billion of external debt through two exchange offers with holders of the Republic’s 2006 and 2013 bonds. Holders of approximately 97% of the principal amount of outstanding bonds participated in the exchanges, which included an initial offer that closed on May 11 and a re-opening that closed July 20. The restructuring, a key part of the Republic’s economic recovery plan, creates a more manageable debt service profile and advances the Republic’s commitment to the Paris Club and International Monetary Fund to obtain comparability of treatment from its other creditors.   

The exchange offers invited holders of the 9.50% bonds due 2006 to exchange for new 9.50% amortizing bonds due 2011, and holders of the 9.04% bonds due 2013 to exchange for new 9.04% amortizing bonds due 2018. Although the new bonds have the same coupon as the old ones, they partially capitalize interest payments due in 2005 and 2006. In effect, the exchange extended the maturities of the Republic’s outstanding bonds by five years.

The new bonds also include collective action and aggregation clauses, which together allow the Republic to modify their payment terms, maturity date, interest rate and other key provisions with the consent of 85% of the aggregate outstanding amount, plus 66 2/3% of each affected series.