Venezuela Is $7 Billion Overdue, But Likely to Pay This Bond

(Bloomberg) -- Venezuela’s next bond payment coming due may be one that it actually makes.

That would be an unusual occurrence for the beleaguered country, where the government and state oil company are behind on almost $7 billion owed to debt investors. What makes this one different, though, is that the $949 million payment coming due Oct. 27 is tied to a bond that’s backed by a majority stake in Citgo Holdings Inc. That means that if holders get stiffed, they can lay claim to the crown jewel of Venezuela’s U.S. assets.

Venezuela is desperate to keep that from happening, so investors seem to be betting that they’ll get their money. The $2.5 billion of notes due in 2020 are trading at a record near 91 cents on the dollar, far higher than most Venezuelan bonds, which hover around 25 cents.

Venezuela Is $7 Billion Overdue, But Likely to Pay This Bond

Even if Venezuela makes the payment, the ultimate fate of Citgo is up in the air. Investors are in the middle of a race to lay claim to assets among increasingly restless creditors. A small Canadian mining company was awarded the right to collect on an arbitration ruling by taking shares of the owner of Citgo Petroleum Corp., a verdict Venezuela is appealing. Separately, an $8 billion bondholder group now advised by Guggenheim Securities has said it’s “exploring options” to ensure that Venezuela’s overseas assets are available to satisfy its claims.

JPMorgan Chase & Co. expects Petroleos de Venezuela SA, known as PDVSA, to make the bond payment because of the government’s strong desire to hold onto Citgo.

“We would expect PDVSA to make every effort to pay,” analysts Javier Zorrilla, Ben Ramsey and Trang Nguyen wrote in a note dated Oct. 10. “PDVSA has demonstrated via its legal efforts a strong preference to maintain ownership of Citgo.”

In the meantime, there is no resolution in sight to Venezuela’s economic malaise, and tensions in the socialist nation are brewing. Despite oil prices rising to a four-year high, output is now half what is was in early 2016. State employees have protested against a 3,000 percent increase to the minimum wage -- calling it inadequate amid hyperinflation. The U.S. is also stepping up sanctions against the regime and its allies, with President Nicolas Maduro’s wife and several of his close associates receiving penalties last month.

That increased pressure gave a lift to bond prices in recent weeks, according to Siobhan Morden, the head of Latin American fixed-income strategy at Nomura.

Here’s the latest breakdown of the securities in flux:
(*Within grace period)

BondCoupon Value (Millions of USD)Due DateGrace Period End
VENZ 2019$96.70Oct. 13, 2017Nov. 13, 2017
VENZ 2024$103.00Oct. 13, 2017Nov. 13, 2017
VENZ 2025$61.20Oct. 21, 2017Nov. 20, 2017
VENZ 2026$176.30Oct. 21, 2017Nov. 20, 2017
VENZ 2023$90.00Nov. 7, 2017Dec. 7, 2017
VENZ 2028$92.50Nov. 7, 2017Dec. 7, 2017
PDVSA 2026$135.00Nov. 15, 2017Dec. 15, 2017
PDVSA 2024$150.00Nov. 16, 2017Dec. 18, 2017
PDVSA 2021$107.70Nov. 17, 2017Dec. 18, 2017
PDVSA 2035$146.30Nov. 17, 2017Dec. 18, 2017
VENZ 2018 7%$35.00Dec. 1, 2017Jan. 2
VENZ 2020$45.00Dec. 12, 2017Jan. 11
VENZ 2036$162.50Dec. 29, 2017Jan. 29
VENZ 2034$70.00Jan. 16Feb. 15
VENZ 2031$251.00Feb. 5March 7
VENZ 2018 13.625%$72.00Feb. 15March 19
PDVSA 2022 12.75%$191.00Feb. 20March 22
VENZ 2022$191.00Feb. 23March 26
VENZ 2027$185.00March 15April 16
VENZ 2038$44.00March 31April 30
ELECAR 2018 (principal)$678.00April 10April 10 
PDVSA 2027$81.00April 12May 14
PDVSA 2037$41.00April 12May 14
VENZ 2019$97.00April 13May 14
VENZ 2024$103.00April 13May 14
VENZ 2025$61.20April 23May 23
VENZ 2026$176.30April 23May 23
PDVSA 2022 6%$90.00April 30May 30
VENZ 2023$90.00May 7June 6
VENZ 2028$92.50May 7 June 6
PDVSA 2026$135.00May 15June 14
PDVSA 2024$150.00May 16June 15
PDVSA 2021$107.70May 17June 18
PDVSA 2035$146.30May 17June 18
VENZ 2018$35June 1July 2
VENZ 2020$45June 11July 11
VENZ 2036$162.5June 29July 30
VENZ 2034$70July 13Aug 13
VENZ 2031$251Aug. 6Sep. 5
VENZ 2018 (principal)$1,053Aug. 15Aug. 15
VENZ 2018$72Aug. 15Sep. 14
PDVSA 2022$191Aug. 17Sep. 17 
VENZ 2022$191Aug. 23Sep. 24
*VENZ 2027$185Sep. 17Oct. 17
*VENZ 2038$44Oct. 1Oct. 31

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