Fitch Affirms Dominican Republic Banks Following Announcement of Sovereign Debt Exchange.

NEW YORK -- Fitch Ratings has affirmed, and removed from Watch Negative, the Dominican banks' long-term foreign currency ratings as set forth below. The Rating Outlook for the banks is Stable.

Banco BHD 

-- Long-term foreign currency affirmed at 'CCC+' (Stable Outlook);

-- Short-term foreign currency affirmed at 'C';

-- Individual affirmed at 'D';

-- Support affirmed at '5'.

Banco Dominicano del Progreso

-- Long-term foreign currency affirmed at 'CCC+' (Stable Outlook);

-- Short-term foreign currency affirmed at 'C';

-- Individual affirmed at 'D/E';

-- Support affirmed at '5'.

Banco Leon

-- Long-term foreign currency affirmed at 'CCC+' (Stable Outlook);

-- Short-term foreign currency affirmed at 'C';

-- Individual affirmed at 'E';

-- Support affirmed at '5'.

Banco Mercantil

-- Long-term foreign currency affirmed at 'CCC' (Stable Outlook);

-- Short-term foreign currency affirmed at 'C';

-- Individual affirmed at 'E';

-- Support affirmed at '5'.

This action follows the downgrade of the Dominican Republic's long-term foreign currency rating to 'C' from 'CCC+', stemming from the announcement of a distressed sovereign debt exchange on USD 1.1 billion in bonds due 2006 and 2013. The rationale for the affirmation of the banks' ratings stems on the fact that they do not currently hold debt that is due to be exchanged in the aforementioned transaction and therefore it should not have a significant impact on these institutions. Also, given that the liquidity position of the Dominican Republic is likely to improve following the debt exchange, banks' prospects are also likely to improve in the medium to longer term. Furthermore, the rated banks' financial profile, while still relatively weak, has improved considerably in the past few months, which places them in a better position to benefit from the economic recovery in the Dominican Republic, when and if this takes place.

In the sovereign press release, Fitch has stated that it deems this transaction to be a distressed debt exchange as the restructuring is essential to meeting the Dominican government's debt service obligations and the offer includes other aspects to compel participation. Upon completion of the exchange, scheduled for May 4, 2005, Fitch will place eligible bonds, as well as the Dominican Republic's foreign currency issuer rating, in a default category. The long-term local currency rating remains at 'CCC+', as local currency obligations are not included in the exchange. In accordance with Fitch's practice in distressed debt exchanges, existing bonds would retain a default rating for at least 30 days. After 30 days, if the government is committed to continuing to pay principal and interest on any outstanding defaulted bonds according to their original terms, the ratings on these securities would be raised to a non-default rating to the extent that they are not fully extinguished through tenders. New securities issued as part of the exchange would be assigned a non-default rating based on Fitch's assessment of the likelihood of timely and complete payment, potentially in the 'B' category, assuming that the new debt service burden resulting from the exchange is manageable in the context of a credible fiscal program, IMF financing assurances, and the continuation of debt relief agreed with the Paris Club.