Venezuela Bonds Plunge With 24 Hours to Go Until PDVSA Payment

(Bloomberg) -- Venezuela’s state oil company has a hefty payment due Friday and the lack of any signs or comments about the funds being transferred has the market in a late stage of panic.

PDVSA’s dollar bonds tumbled more than four cents with yields on notes due 2020 jumping more than 2 percentage points to 17.3 percent. The probability of PDVSA defaulting on its debt over the next year has jumped to 79 percent with the odds over the next five years at 99 percent, according to credit default swap trading.

Venezuela Bonds Plunge With 24 Hours to Go Until PDVSA Payment

Venezuela is already two weeks late on coupons for a slew of other bonds. Those payments had a grace period -- a buffer of sorts that gives the country an additional 30 days to work out the technical glitches and deliver the cash. The principal portions of the payments owed over the next week contain no such language. Miss the due date and bondholders can cry default.

"Fear is higher now because the deadline is approaching quickly," said Lutz Roehmeyer, who helps oversee about $14 billion at Landesbank Berlin Investment GmbH. "I am still confident that they find a creative way to pay."

If the money isn’t in accounts by Friday afternoon creditors may opt to wait until early next week to see if the funds arrive late since there are few incentives to accelerate the debt and spark a potential cross default on the rest of the issuer’s debt. Credit agencies will also be watching closely on whether to downgrade the oil giant deeper into junk.

©2017 Bloomberg L.P.