DOMINICAN REPUBLIC Law and Practice Contributed by: Marielle Garrigó, Urania Paulino, Eduardo Pellerano and Ricardo Pellerano Nadal, Pellerano Nadal Law & Consulting
1. Market 1.1 Major Lender-Side Players
monly use leveraged buyouts (LBOs), utilising a considerable amount of debt and committing, in proportion, significantly less equity/capital to acquire the target. The first landmark LBO in the Dominican Repub- lic was in 2008, where an international private equity firm acquired 100% of a Dominican air- port operation. Since then, LBOs have become the usual method for private equity firms to make acquisitions in the country, as is the case in the global private equity market. In terms of governing law, there are no specific requirements in the Dominican Republic since our legal system provides that the parties to any agreement are free to stipulate the provisions that will regulate it, as long as they do not con- travene any law or else they will be considered void. However, it is important to note that any col- lateral that is located in the Dominican Republic is regulated by Dominican law and, therefore, Dominican law-governed security agreements are usually prepared to register such collateral in the corresponding local public authority, to guarantee the lenders’ rights (security ranking) over the collateral. Specific requirements may vary in regard to regulated industries. The following are the finance methods used most often in the Dominican market. 2. Documentation 2.1 Governing Law • Corporate loans – mostly used for working capital purposes or for smaller acquisitions and will in most cases be granted by local banks under Dominican law-governed docu-
Similar to other jurisdictions from the region, the main acquisition finance players in the Domini- can Republic are international banks, local banks and, in recent years, various international debt funds that have ventured into several sectors to finance different types of operations. Usually, local banks participate in small- to mid- market deals and acquisition of target compa- nies, where the buyer is also local. International banks and debt funds usually engage in mid- to large-market deals and targets, in many cases, with an international buyer. International banks and debt funds are also involved in cross-border transactions, where the Dominican target entity is just part of a bigger international acquisition. In both cases, local banks may participate as part of a syndicate formed by international play- ers and, in some cases, may act as local col- lateral agents. In this regard, it is important to point out that these acquisition finance deals are mostly gov- erned by US or UK law, since they are the most common types of structures used internation- ally. The local collateral package, if applicable, is granted by Dominican-governed security agree- ments. 1.2 Corporates and LBOs The acquisition finance market in the Domini- can Republic involves both local and interna- tional mid and large-cap corporations (by local standards). The acquisitions may be due to com- panies looking for vertical or horizontal integra- tion, or in the case of some foreign companies, looking to enter the Dominican market. They may also be due to private equity firms looking for investments in the country. The latter com-
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