Bank of America rules out default by Venezuela
Other investors are concerned, while cost to ensure debt soars
EL UNIVERSAL
Thursday October 16, 2014 10:47 AM
In the view of Bank of America (BofA), Venezuela is far from falling into default. BofA claims that Venezuela's external accounts have shown that following considerable reductions in imports over the last two years, the public sector is no longer accruing foreign net liabilities, which is pivotal to external sustainability.
However, other experts believe Venezuela is very likely to default. This means a rise in the costs for securing the country's debt against late payments or restructuring on the markets, while oil prices have slumped to their minimum value in 27 months.
An investor wanting to ensure a USD 10 million trade for five years would need to spend USD 4.17 billion as an up-front cost. In addition they would have to pay USD 500,000 annually, for the duration of the credit default swap contract, according to data provided to Reuters by Markit.
However, other experts believe Venezuela is very likely to default. This means a rise in the costs for securing the country's debt against late payments or restructuring on the markets, while oil prices have slumped to their minimum value in 27 months.
An investor wanting to ensure a USD 10 million trade for five years would need to spend USD 4.17 billion as an up-front cost. In addition they would have to pay USD 500,000 annually, for the duration of the credit default swap contract, according to data provided to Reuters by Markit.
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