Dominican Republic pays oil debt to Caracas

OREANDA-NEWS. The Dominican Republic has paid off 98pc of its accumulated debt to Venezuela for oil supplies shipped under the PetroCaribe program, Dominican finance minister Simon Lizardo said yesterday.

The countrys PetroCaribe debt was \\$4.1bn at the end of last month, and the government paid Venezuela in bonds worth \\$1.93bn, based on a discount of 52pc, Lizardo said.

The Dominican Republic's outstanding debt to Caracas was reduced to only \\$96.5mn, but could begin to rebound because Venezuelan state-owned oil company PdV continues to ship to the country around 30,000 b/d, about half crude oil and half refined products, under PetroCaribe.

PdV is a 49pc partner in the 34,000 b/d Refidomsa refinery that is controlled by the Dominican government with 51pc.

The payment to PdV was made from the proceeds of a \\$2.5bn sovereign bond issuance on 20 January, Lizardo said, adding that it was the largest single bond operation in the Caribbean country's history.

The issuance, which was co-managed by Bank of America Merrill Lynch and JP Morgan, consisted of a \\$1bn 10-year bond priced to yield 5.5pc and a \\$1.5bn 30-year bond priced to yield 6.85pc.

US investment bank Goldman Sachs, which had engaged in earlier debt discussions with Santo Domingo, was not involved, the Venezuelan energy ministry said.

PdV and the energy ministry declined to comment on details of the transaction.

But an energy ministry official told Argus today that the operation was "very positive" for Venezuela because it reduces PdV's outstanding PetroCaribe debt portfolio by "about 25pc" and gives the cash-strapped company over \\$1.9bn in immediate hard currency that likely will used to pay down part of PdV's debts to the central bank, currently estimated at over \\$70bn.

Under PetroCaribe, PdV supplies over a dozen Caribbean and Central American countries with around 200,000 b/d of crude and products, and allows them to keep a part of the payment as a long-term, low interest loan.

PetroCaribe members can also pay their oil-related debt in non-oil goods like agricultural products.

The PetroCaribe debt that Dominican Republic retired was charging 1pc annual interest, the Venezuelan energy ministry said.

"This transaction was carried out taking PdV as a partner in the process, and is the result of negotiations that started over a year ago," Lizardo said. "This was an initiative of the government of the Dominican Republic, through the finance ministry."

Fellow PetroCaribe member Jamaica, another major debtor in the program, is examining several bank proposals that would transfer and reduce its \\$3bn PetroCaribe debt, Jamaican finance minister Peter Phillips said last month.

The government has not yet concluded any agreements with any of the institutions, a finance ministry official told Argus last night.