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A group of investors holding part of a secured US$2.5-billion bond issued by Venezuela’s PDVSA and maturing in 2020 are organizing ahead of an interest payment due to be made this Friday, according to sources who spoke to Bloomberg. The sources remained unnamed because of the private nature of the discussions.
PDVSA is due to pay a total US$107 million to its bondholders this Friday. The group, which includes Ashmore Group as the largest bondholder of the 2020 notes, is preparing for a possible disappointment given Venezuela’s near-empty foreign currency coffers. According to the sources, the bondholders have hired law firm White & Case to advise them on the matter.
What happens next would be interesting to watch because the bond is secured with a 50.1-percent interest in PDVSA’s U.S. business Citgo and if the company fails to make the interest payment, the bondholders will be free to enforce their first-priority lien on this collateral.
Bondholders are becoming impatient with Venezuela, after in November President Maduro announced the country will try to restructure some US$60 billion in debt to facilitate repayments amid the hard currency crisis.
Yet a report in the Financial Times from earlier this month said that data from the country’s central bank suggests Caracas stopped paying debt holders in September last year. According to this data, monthly foreign debt payments fell from several hundred million dollars to several tens of millions in fee payments.
If the government cannot service its foreign debt then it’s probably safe to assume that PDVSA is in no better condition with regard to its debt. However, the fact is that bondholders of PDVSA notes and of debt issued by local utility Elecar have received several payments after the debt restructuring announcement, the FT notes. These payments have been sporadic, to the tune of US$2.5 billion in total, but they have been made, which might offer a gleam of hope to the bondholders of the secured 2020 notes.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.