Log in
Forgot password ?
Become a member for free
Sign up
Sign up
Dynamic quotes 

MarketScreener Homepage  >  News  >  Economy & Forex  >  All News

News : Economy & Forex

Latest NewsCompaniesMarketsEconomy & ForexCommoditiesInterest RatesBusiness LeadersFinance ProfessionalsCalendarSectors 
All NewsEconomyCurrencies / ForexCryptocurrenciesEconomic EventsPress releases

Venezuela says debt refinancing under way, S&P calls selective default

share with twitter share with LinkedIn share with facebook
share via e-mail
11/14/2017 | 07:49pm CEST
Venezuela's President Nicolas Maduro speaks during a meeting with ministers in Caracas

CARACAS/NEW YORK (Reuters) - Venezuela's cash-strapped government insisted it had successfully begun efforts to refinance some $60 billion in bonds, though creditors disagreed following fruitless talks and a ratings firm declared the nation in selective default.

Venezuelan bonds slid on Tuesday after S&P Global Ratings announced that Venezuela was in selective default for failing to make $200 million in overdue coupon payments on its 2019 and 2024 global issues within a 30-day grace period.

Investors, meanwhile, voiced concern after President Nicolas Maduro's negotiators met briefly with bondholders in Caracas on Monday but failed to present firm proposals to alleviate the OPEC nation's crippling foreign debt amid an unprecedented economic meltdown.

"The process of refinancing Venezuela's foreign debt began with resounding success," the socialist government said late Monday, complaining about U.S. financial sanctions and what it called unfair assessments from international ratings agencies.

The government repeated pledges to honor all its foreign debt and said Monday's talks were attended by 100 or so participants, including bondholders from Venezuela, the United States, Panama, Britain, Colombia, Chile, Japan and Argentina.

However, attendees at the meeting came away confused over how Venezuela plans to avoid a default, given its parlous state finances, and how any refinancing could be worked out amid U.S. President Donald Trump's sanctions.

The U.S. measures block the issuance of any new Venezuelan debt and impose sanctions on the country's chief negotiators, Vice President Tareck El Aissami and Economy Minister Simon Zerpa, on drug and corruption charges.

Venezuela has dismissed those accusations as politically motivated fabrications by Washington to tarnish the country's reputation.

"The bondholder meeting in Venezuela was a non-event, lasting only 20-30 minutes with reports of only 10 non Caracas-based investors...and the only official that spoke was drug kingpin VP Tareck El Aissami" said Siobhan Morden, head of Latin American fixed-income strategy at Nomura, who did not attend.

Four years of recession in the South American nation, fueled by failing socialist economics and a plunge in global oil prices, have hit Venezuelans hard. Many skip meals or suffer from malnutrition and preventable diseases, due to severe shortages of food and medicine and triple-digit inflation.

With some $9 billion in payments looming for 2018, a default would be a short-term relief for the government, enabling Maduro to spend on desperately-needed food and medicine imports ahead of next year's presidential election.

But that strategy could also backfire if it sparks aggressive legal challenges from abroad, including moves to seize assets of state oil company PDVSA, [PDVSA.UL] which is the cash-cow for Venezuela's socialist system.


Despite concern that U.S. sanctions could prevent Venezuela hiring advisors, the government has appointed lawyer David Syed - a former partner at Orrick, Herrington & Sutcliffe - to advise it, working alongside a team at global law firm Dentons, according to IFR, a Thomson Reuters news service.

On another flank of the country's creditworthiness, a committee of the International Swaps and Derivatives Association (ISDA) is looking into whether PDVSA triggered a credit event through late payment of its 2017N bond this month.

The group said it would reconvene on Thursday to continue discussions of whether or not PDVSA was in default.

ISDA also said on Tuesday it had received another request from investors as to whether Venezuela had triggered a credit event due to the late payment of the coupon on its sovereign bonds.

Bondholders had told Reuters on Monday they had not yet received payments on the 2019 and 2024 bonds but were unconcerned about the delay, which they said was partly due to increased bank vigilance following the U.S. sanctions.

In its statement on Monday, S&P Global Ratings said it could raise Venezuela's ratings again if the government made payments on the overdue coupons and remained timely on other payments before the restructuring is completed.

However, it said it saw a one-in-two chance that Venezuela could default again within the next three months and it listed a further four bonds with overdue coupon payments due in the coming weeks, with unpaid obligations totaling $420 million.

The Luxembourg Stock Exchange said on Tuesday said it was temporarily halting trading of Venezuela's 2019 and 2024 bonds due to the "event of default" in order to make changes to the way in which the securities are traded.

Fitch Ratings also downgraded PDVSA due to "payment default" on notes due on Oct. 27 and Nov. 2 after "processing delays that resulted in bondholders receiving principal payments up to one week after the due date."

Venezuela's sovereign bonds, already the most distressed in the benchmark JPMorgan Emerging Markets Bond Index Plus (EMBI+) <11EMJ>, have whipsawed over the past week.

The index measures the spreads of 13 Venezuelan sovereign bonds versus benchmark U.S. Treasuries.

Last week, as the Caracas talks loomed, investors bought Venezuela's bonds on speculation there might be progress in finding a solution, driving a 1,095 basis-point narrowing in spreads from Nov. 7 through Monday.

However, on Tuesday, spreads ballooned by 714 basis points as investors dumped Venezuelan bonds.

(For a graphic on 'Venezuela's economy' click http://tmsnrt.rs/2pPJdRb)

(Writing by Daniel Flynn and Andrew Cawthorne; Additional reporting by Eyanir Chinea, Brian Ellsworth, Deisy Buitrago and Corina Pons in Caracas; Daniel Bases in New York; Editing by Bernadette Baum, Jeffrey Benkoe and Frances Kerry)

By Andrew Cawthorne and Dion Rabouin

share with twitter share with LinkedIn share with facebook
share via e-mail
Latest news "Economy & Forex"
01:39pWORLD STEEL ASSOCIATION : August 2018 crude steel production
01:36pOPEC's Barkindo calls for cooperation between OPEC and non-OPEC countries
01:36pOil hits four-year peak after OPEC+ shows no sign of turning on the taps
01:36pOil hits four-year peak after OPEC+ shows no sign of turning on the taps
01:35pCURRENCIES : U.S. Dollar Struggles For Direction Ahead Of Widely Expected Fed Rate Hike
01:34pMINISTRY OF FINANCE OF REPUBLIC OF INDIA : Monthly Review of Union Government of India up to the month of August 2018 for the Financial Year 2018-19
01:33pFutures climb on oil boost, Fed meeting eyed
01:32pTSX futures rise as oil hits four-year highs
01:29pUNOG UNITED NATIONS OFFICE AT GENEVA : Human rights council holds interactive dialogue with the working group of experts on people of african descent
01:29pICELAND : Staff Concluding Statement of the 2018 Article IV Mission
Latest news "Economy & Forex"