Herceg Novi was founded in 1382 by the Bosnian king Tvrtko I as a defensive structure, and was originally called Sveti Stefan, now another city in Montenegro bears this name. For medieval Bosnia, this fortress was of great strategic importance and was the most important outlet to the sea. After the death of the king, power passed to Prince Sandal Hranich from the Kosacha dynasty. During his reign, the city experienced a strong economic boom and functioned as a major center for the salt trade. At the time of the reign of Stefan Vukchich, the city began to be called Herceg Novi. In 1466, the Republic of Venice made an offer to the Duke of Vukcic to exchange Herceg Novi and the city of Risan for the island of Brac and the palace in Split, but the duke refused.