NewsWhore
02-11-2008, 05:30 PM
Specialists are listing the negative effects that the Sun Land affair is projecting around the world. While President Fernandez has declared the case "closed", echoes from leading brokerage firms indicate the contrary.
Standard & Poor's Ratings Services said today that it placed its 'B+' long- and 'B' short-term sovereign credit ratings on the Dominican Republic on CreditWatch with negative implications. The CreditWatch placement reflects uncertainty surrounding promissory notes due between March and July 2008, including the possibility that they will not be paid because they were issued illegally. The matter highlights institutional weakness, which is the key rating constraint on the Dominican Republic.
In a press release, Standard & Poor's credit analyst Richard Francis explained Standard & Poor's credit analyst Richard Francis explained that the outstanding promissory notes are part of a series totaling US$130 million (0.3% of GDP) issued over the course of 2006 to SunLand Corporation and sold to other investors. Arrears arose in September of 2007, and while these notes have now been brought current, there is a substantial risk that the four remaining notes in the amount of nearly US$6.8 million each and due in March, April, June, and July of 2008 might not be paid on time, given question that have arisen over their legality. The Dominican Republic has a history of poor debt management and lack of transparency. Furthermore, this incident calls into question the integrity of the fiscal accounts.
According to Dominican Law 6-06 on Public Credit, all financial obligations must be approved by Congress and signed by the Minister of Finance in addition to undergoing several other procedures, such as registration with the Office of Public Credit. None of these procedures appears to have been followed in the SunLand deal, leading to the question of legality under Dominican law, as reported by the firm.
"While the government has undertaken reform aimed at institutional strengthening in such areas as debt management and financial supervision, the SunLand deal underscores the continued limitations in the implementation of this reform. Government financing is likely to become more costly if these issues persist," Mr. Francis said.
Standard & Poor's indicates that it expects to resolve the CreditWatch placement when there is clarification of the legality of the promissory notes, the government's intentions with regard to payment, and the impact this incident will have on the government's ability to tap international markets.
More... (http://www.dr1.com/index.html#5)
Standard & Poor's Ratings Services said today that it placed its 'B+' long- and 'B' short-term sovereign credit ratings on the Dominican Republic on CreditWatch with negative implications. The CreditWatch placement reflects uncertainty surrounding promissory notes due between March and July 2008, including the possibility that they will not be paid because they were issued illegally. The matter highlights institutional weakness, which is the key rating constraint on the Dominican Republic.
In a press release, Standard & Poor's credit analyst Richard Francis explained Standard & Poor's credit analyst Richard Francis explained that the outstanding promissory notes are part of a series totaling US$130 million (0.3% of GDP) issued over the course of 2006 to SunLand Corporation and sold to other investors. Arrears arose in September of 2007, and while these notes have now been brought current, there is a substantial risk that the four remaining notes in the amount of nearly US$6.8 million each and due in March, April, June, and July of 2008 might not be paid on time, given question that have arisen over their legality. The Dominican Republic has a history of poor debt management and lack of transparency. Furthermore, this incident calls into question the integrity of the fiscal accounts.
According to Dominican Law 6-06 on Public Credit, all financial obligations must be approved by Congress and signed by the Minister of Finance in addition to undergoing several other procedures, such as registration with the Office of Public Credit. None of these procedures appears to have been followed in the SunLand deal, leading to the question of legality under Dominican law, as reported by the firm.
"While the government has undertaken reform aimed at institutional strengthening in such areas as debt management and financial supervision, the SunLand deal underscores the continued limitations in the implementation of this reform. Government financing is likely to become more costly if these issues persist," Mr. Francis said.
Standard & Poor's indicates that it expects to resolve the CreditWatch placement when there is clarification of the legality of the promissory notes, the government's intentions with regard to payment, and the impact this incident will have on the government's ability to tap international markets.
More... (http://www.dr1.com/index.html#5)