Pellerano & Herrera represented US$2.5 billion sovereign bond offering awarded by LatinFinance

Leading Dominican law firm, Pellerano & Herrera, counseled the underwriters in the US$2.5 billion bond offering by the Dominican State, awarded “Sovereign Liability Management of the Year 2015” at the Latin Finance Deals of the Year Awards on January 14th, 2016 in New York city.

Pellerano & Herrera represented JP Morgan and Merrill Lynch Pierce Fenner & Smith, investment banks that acted as underwriters of the deal. Pellerano & Herrera is the only law firm in the Dominican Republic that has advised on bond offerings by the Dominican State. Simpson Thacher & Bartlett also served the investment banks as US counsel and Cleary Gottlieb Steen & Hamilton represented the Dominican State.

Luis R. Pellerano P., partner of the firm, highlighted that the Dominican Government has made significant progress in managing its international commitments. He said, “management of State finances has significantly become more sophisticated during the present administration of the General Directorate of Public Credit, led by Vice Minister Magín Díaz, with the support of Minister of Finance Simón Lizardo”.

Minister of Finance, Simón Lizardo, received the award for the US$2.5 billion bond offering, which has been the largest offering made by the Dominican State.

The deal was a 144A/ Reg. S US$2.5 billion offering comprised by two series of bonds, which was a record in aggregate amount issued by the Dominican Republic, including US$1.0 billion of 5.500% bonds due 2025 and US$1.5 billion of 6.850% bonds due 2045. The initial purchasers of the bonds were J.P. Morgan and Merrill Lynch Pierce Fenner & Smith. Additionally, BanReservas acted as co-manager with respect to the bonds.

The Dominican Republic used US$1.9 billion of the proceeds of the global bond issuance to redeem 98% of the $4 billion in outstanding debt accumulated with PDVSA under the Petrocaribe agreement from 2005-2014, arising from shipments of oil and derivative products sold by PDVSA. The Dominican Republic acquired the debt from PDVSA at a principal discount of 52%. The significant discount led to a decrease of 3.3% of the GDP in public debt and reduced annual debt servicing costs by US$100 million.

Luis R Pellerano P suggests the Dominican State take advantage of the international experience in the handling of State finances and of the doors that have opened for the benefit of the country. He said hedging operations among others should be considered, which will allow the country to be prepared in the event of future increases in oil prices that frequently affect the national economy.

This is the first deal under the new public debt law approved by the Dominican congress on November 2014, which granted the Ministry of Finance greater flexibility to tap international bond markets and conduct liability management transactions. The Dominican Republic's capacity to access international capital markets at favorable terms facilitated the transaction.

LatinFinance is the leading source of intelligence on financial markets and economies of Latin America and the Caribbean. LatinFinance's Awards, Scorecards and Rankings are industry-recognized benchmarks of excellence in capital markets and financing in Latin America.

Pellerano & Herrera has been the leading law firm in the country for more than 25 years. Pellerano & Herrera has the most complete and multidisciplinary team of lawyers in the country, with vast experience in more areas of practice than any other firm in the country. It has been awarded the most important award in the legal industry -“Firm of the Year”- by prestigious ranking firm Chambers and Partners based on client interviews - five out of seven years (2009, 2010, 2011, 2013 and 2015). The firm is also ranked by other renowned legal directories such as: International Financial Law Review (IFLR), Latin Lawyer and Legal 500.

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