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One Bondholder Put A Price On Goldman’s Venezuelan ‘Hunger Bonds’

A Pennsylvania-based asset manager has said that the US$2.8 billion bonds of Venezuela’s oil firm PDVSA, which Goldman Sachs bought last month for US$0.31 on the dollar, were worth US$0.33 on the dollar at the end of May, Bloomberg reported on Monday, citing a filing of asset manager SEI Investments.

Since Goldman Sachs Asset Management serves as a sub-adviser to some of SEI’s assets, SEI ended up holding US$8.9 million of the bonds.

Goldman Sachs has bought around US$2.8 billion bonds issued by Venezuela’s embattled state oil firm PDVSA, betting that a change in the Venezuelan regime could more than double the value of debt. But with this bond purchase, Goldman drew criticism over extending a life-line to a repressive government amid civil unrest. Quoting people familiar with the transaction, The Wall Street Journal reported that Goldman’s asset management division paid US$0.31 on the dollar, or around US$865 million, for bonds that PDVSA issued in 2014 and that mature in 2022.

Since news broke that Goldman has acquired the bonds, that debt has become known as “hunger bonds”, with Venezuelan opposition saying that President Nicolas Maduro’s increasingly dictatorship regime is servicing bonds, while Venezuelans are suffering from food and medicine shortages in a crippled country with hyperinflation.

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SEI has declined to share how it had calculated how much the bonds were worth, but a spokeswoman told Bloomberg that the evaluation was made according to the requirements in the fund’s prospectus.

Goldman’s asset management division has not offered the bonds to any dealers, Bloomberg reports, quoting spokesman Andrew Williams.

Almost all investors who have been approached by brokers for gauging the possible interest in the bonds have said that they are suspicious of the securities, which Venezuela’s opposition claims are illegal and would not be serviced if it takes power in the country.

By Tsvetana Paraskova for Oilprice.com

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  • Goldman on June 12 2017 said:
    They are non stop bearish oil prices. Yet they buy bonds from a country that will go broke if oil stays under $50. Kind of like 2008 tell your customers to buy while you short. None the less it shows the morals of this company after this purchase. Just terrible but not surprising

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