Venezuela Is $7 Billion Overdue, But Likely to Pay This Bond
Venezuela Is $7 Billion Late on Debt 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.
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)
Bond | Coupon Value (Millions of USD) | Due Date | Grace Period End |
VENZ 2019 | $96.70 | Oct. 13, 2017 | Nov. 13, 2017 |
VENZ 2024 | $103.00 | Oct. 13, 2017 | Nov. 13, 2017 |
VENZ 2025 | $61.20 | Oct. 21, 2017 | Nov. 20, 2017 |
VENZ 2026 | $176.30 | Oct. 21, 2017 | Nov. 20, 2017 |
VENZ 2023 | $90.00 | Nov. 7, 2017 | Dec. 7, 2017 |
VENZ 2028 | $92.50 | Nov. 7, 2017 | Dec. 7, 2017 |
PDVSA 2026 | $135.00 | Nov. 15, 2017 | Dec. 15, 2017 |
PDVSA 2024 | $150.00 | Nov. 16, 2017 | Dec. 18, 2017 |
PDVSA 2021 | $107.70 | Nov. 17, 2017 | Dec. 18, 2017 |
PDVSA 2035 | $146.30 | Nov. 17, 2017 | Dec. 18, 2017 |
VENZ 2018 7% | $35.00 | Dec. 1, 2017 | Jan. 2 |
VENZ 2020 | $45.00 | Dec. 12, 2017 | Jan. 11 |
VENZ 2036 | $162.50 | Dec. 29, 2017 | Jan. 29 |
VENZ 2034 | $70.00 | Jan. 16 | Feb. 15 |
VENZ 2031 | $251.00 | Feb. 5 | March 7 |
VENZ 2018 13.625% | $72.00 | Feb. 15 | March 19 |
PDVSA 2022 12.75% | $191.00 | Feb. 20 | March 22 |
VENZ 2022 | $191.00 | Feb. 23 | March 26 |
VENZ 2027 | $185.00 | March 15 | April 16 |
VENZ 2038 | $44.00 | March 31 | April 30 |
ELECAR 2018 (principal) | $678.00 | April 10 | April 10 |
PDVSA 2027 | $81.00 | April 12 | May 14 |
PDVSA 2037 | $41.00 | April 12 | May 14 |
VENZ 2019 | $97.00 | April 13 | May 14 |
VENZ 2024 | $103.00 | April 13 | May 14 |
VENZ 2025 | $61.20 | April 23 | May 23 |
VENZ 2026 | $176.30 | April 23 | May 23 |
PDVSA 2022 6% | $90.00 | April 30 | May 30 |
VENZ 2023 | $90.00 | May 7 | June 6 |
VENZ 2028 | $92.50 | May 7 | June 6 |
PDVSA 2026 | $135.00 | May 15 | June 14 |
PDVSA 2024 | $150.00 | May 16 | June 15 |
PDVSA 2021 | $107.70 | May 17 | June 18 |
PDVSA 2035 | $146.30 | May 17 | June 18 |
VENZ 2018 | $35 | June 1 | July 2 |
VENZ 2020 | $45 | June 11 | July 11 |
VENZ 2036 | $162.5 | June 29 | July 30 |
VENZ 2034 | $70 | July 13 | Aug 13 |
VENZ 2031 | $251 | Aug. 6 | Sep. 5 |
VENZ 2018 (principal) | $1,053 | Aug. 15 | Aug. 15 |
VENZ 2018 | $72 | Aug. 15 | Sep. 14 |
PDVSA 2022 | $191 | Aug. 17 | Sep. 17 |
VENZ 2022 | $191 | Aug. 23 | Sep. 24 |
*VENZ 2027 | $185 | Sep. 17 | Oct. 17 |
*VENZ 2038 | $44 | Oct. 1 | Oct. 31 |
--With assistance from Katia Porzecanski, Ben Bartenstein and Jose Enrique Arrioja.
To contact the reporter on this story: Patricia Laya in Caracas at playa2@bloomberg.net
To contact the editors responsible for this story: Daniel Cancel at dcancel@bloomberg.net, ;Jeremy Herron at jherron8@bloomberg.net, Brendan Walsh
©2018 Bloomberg L.P.