CARACAS: Venezuelan state oil company PDVSA began making a major bond payment due on Friday, easing short-term worries about default but leaving the socialist government with less cash to attend to food shortages and economic depression.
Investors had fretted last week that cash-flow problems and regulatory hurdles resulting from US sanctions on the government of President Nicolas Maduro might leave the company unable to make the nearly $1 billion payment.
Venezuela’s socialist policies have resulted in an economic depression, soaring inflation, and shortages of food and medicine, despite being an Opec country with among the largest oil reserves in the world.
Bondholders have for years shrugged off Venezuela’s economic implosion, insisting Maduro’s willingness to pay and Venezuela’s substantial offshore assets made the high-yield debt a good bet.
But sources close to the government this week said Maduro had considered not paying, and that the last-minute approval came after intense discussions among cabinet members about the potential benefits of defaulting.
PDVSA “has knocked down the doomsday voices that were betting on economic meltdown and attacking the Venezuelan people, in conspiracy with the global economic oligarchy, with the aim of destabilising and sabotaging the Bolivarian government’s economic advances,” PDVSA said in a statement.
PDVSA transferred $841.88 million in principal on the 2020 bond to accounts at JPMorgan, the statement said, without mentioning the outstanding $143 million coupon payment also due.
Late Friday Vice-President Tareck El Aissami confirmed the payment, adding, “They were not able to block us.”
PDVSA did not immediately respond to a further request for comment. JPMorgan also declined to comment.
Clearing house Clearstream, which facilitates payment to bondholders, did not respond to a request for comment on whether it had received the money.
Two operators, requesting anonymity said the money has been sent but had not yet arrived. Several financial sources said Monday would bring clarity.
Venezuela and PDVSA bond prices rose earlier on Friday following a Reuters report that the payment had been initiated.
PDVSA’s 2017N bond, which comes due on Thursday, was up 7.150 points to a bid price of 96.500, according to Thomson Reuters data, while Venezuela’s 2022 bond was up 3.8750 points to bid 44.250.
The 2020 bond, which was issued last year as part of a refinancing effort, is backed by shares of PDVSA’s Citgo US refining and marketing subsidiary.
Separately, on Friday Venezuela said it had appointed Simon Zerpa, PDVSA’s chief financial officer, as the Opec member’s acting economy minister.
Investor concerns will now turn to the company’s next looming large debt commitments. PDVSA faces a $1.2 billion debt payment next week, while Venezuela and PDVSA have around $10 billion in bond service next year.
“At some point down the road, if it’s not tomorrow it’s going to be, who knows, in some months, in one year — the risk of a (default) is very high,” said Mauro Roca, sovereign analyst at asset manager TCW, which has $201.6 billion under management.
Roca added that US sanctions against Maduro, which bar banks from providing new financing to Venezuela, will make a debt restructuring impossible, further clouding the long-term panorama.— Reuters
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