UBS: Venezuela: Credit event moves to center case in 2015

Emerging market bonds

Venezuela: Credit event moves to center case in 2015 Michael Bolliger analyst Report als PDF bei mir gegen email:   rolfjkoch@web.de Dear reader, As oil prices moved another leg lower in December, the spreads of Venezuelan sovereign and quasi-sovereign bond prices continued to trend higher. The market is now pricing in a probability of a credit event in 2015 of more than 50%. Although this number might be too high, we also attach a significant probability to a Venezuelan credit event in 2015. Accordingly, we reiterate our recommendation to sell Venezuelan bonds despite the recent sell-off. We see a wide range of possible recovery values for Venezuelan bonds, ranging from 30% to 50%, depending on domestic and global parameters. Given that Venezuelan sovereign bonds already trade at very depressed prices, the downside from a credit event might be limited. This said, the potential downside can still be considerable and the restructuring process can be long and tedious. Market liquidity has been poor recently, which lead to significant correction across markets and regions. Investors might therefore opt for a staggered approach when reducing their Venezuelan bond exposure.