LONDON/CARACAS: Investors holding billions of dollars in defaulted Venezuelan bonds have formed at least one bondholder committee that is seeking a financial adviser, according to several sources familiar with the matter, in a sign they may be gearing up for a legal dispute.
President Nicolas Maduro’s government began quietly halting interest payments on some $50 billion in publicly traded debt last year in an effort to save hard currency for the collapsing socialist economy, which is suffering from hyperinflation.
Investors have been slow to move against Venezuela and its state oil company, PDVSA, in part because Maduro has shown no signs of advancing the kind of reforms - including an overhaul of the oil industry - needed to restore economic stability.
The committee that is close to naming an adviser recently met in London and will meet again this week in Washington, possibly as early as Wednesday, the sources said.
“Clearly the situation is unsustainable,” said an investor source familiar with the situation. “Venezuela is in a situation where it will break one way or another.” The creditors “want to be ready to be part of getting that sorted out,” the source said.
Another source said investment bank Houlihan Lokey Inc is the front-runner for the financial adviser job but a decision is not yet final. Houlihan Lokey did not immediately respond to a request for comment.
Another source, meanwhile, said other creditors had formed at least one other committee.
The formation of the committees and appointment of advisers could signal investors are marshalling forces for an eventual legal dispute with Venezuela — a move known as an acceleration that requires backing from holders of 25 per cent of a given bond. That could unleash international court battles similar to a 15-year dispute between creditors and Argentina after it defaulted on its sovereign debt in early 2002. — Reuters
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