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Bloomberg
Venezuela’s state-run oil company is preparing to make a $949 million bond payment that’s due October 29, according to reports.
Petroleos de Venezuela SA’s (PDVSA) plan to make the coupon and partial principal repayment on the 2020 notes would mark a rare exception for Nicolas Maduro’s government, which has racked up nearly $7 billion in defaulted debt to investors. This bond is backed by a majority stake in Citgo Holding Inc., meaning a non-payment would allow bondholders to lay claim to the crown jewel of Venezuela’s US assets. The payment has been anticipated by investors. The $2.5 billion of notes are trading near a record high of 92 cents on the dollar, far higher than most Venezuelan bonds.
Analysts from JPMorgan Chase & Co., Torino Capital and Eurasia Group have also said the socialist government would pay because of its desire to hold on to Citgo, although there are doubts about how much longer PDVSA can service the debt.
“The government’s strategy with regards to various creditor obligations seems to be to avoid or delay paying wherever possible but pay or settle when valuable external assets are in jeopardy,” Risa Grais-Targow, a senior analyst at Eurasia Group, wrote in a note Monday. “There are limits to this strategy, as the government still faces meaningful cashflow constraints owing to declining cash-generating oil exports.”
Even with the payment, Citgo’s fate remains in flux. A small Canadian mining company, Crystallex International Corp., was awarded the right to collect on an arbitration ruling by taking shares of the owner of Citgo Petroleum Corp., a verdict Venezuela is appealing. Separately, an $8 billion bondholder group advised by Guggenheim Securities has said it’s “exploring options†to ensure that the nation’s overseas assets are available to satisfy its claims.