Venezuela's Bond Drama Has Investors Desperate for Information

(Bloomberg) -- The will-they-or-won’t-they drama surrounding the Venezuelan state oil company’s $842 million payment Friday is prompting investors to try some unusual strategies to get an idea of what’s going to happen.

A New York-based hedge fund manager who holds PDVSA bonds says he has the oil company, the public credit office, two clearing houses and a settlement service on speed dial, periodically calling each one to beg for any information on payments. A portfolio manager in London has his assistants checking in with Euroclear and Clearstream every few hours. Another investor in New York says he’s had to learn the name of the folks who work in his back office since he’s constantly reaching out to them to ask for updates.

The desperate tactics reflect the growing uncertainty over whether Petroleos de Venezuela SA will be able to come up with the money on time, and the high stakes involved. If the company is just one day late with its payment, investors can declare an event of default and demand immediate repayment on almost all the oil producer’s outstanding debt. It’s already behind on some interest payments that came with a grace period, but government officials keep reassuring bond holders that they have every intention of coming through.

That’s not enough for some investors, however, and the company’s notes are staging a selloff with less than 24 hours to go until the payment deadline. Notes that mature early next month have dropped about 2 cents to less than 91 cents on the dollar.

One sign supporting the optimists is that while Venezuela and PDVSA remain late on more than $400 million of interest payments, the company somehow this week got a $41 million payment to holders of its bonds due in 2037. Traders said they heard various explanation for how the money came in, including that it was routed via a Singapore-based account and that one step in the payment chain was skipped in order to get the funds to creditors faster.

One banker who’s in emerging-market fixed-income sales in New York said that his only certainty is that no one really knows what is going on.

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