Potential debt swap submitted to Pdvsa bondholders
Experts said that Pdvsa 2016 bonds would become 2024 notes
Rothschild & Co. has made known to bondholders of state-run oil company Petróleos de Venezuela (Pdvsa) its plans to propose a debt swap operation to the state-owned oil company in representation of bondholders, experts from the energy sector reported.
Based on a report, the plan would involve swapping out of Pdvsa 2016 and 2017 bonds in exchange for bonds maturing in 2024 and beyond. Furthermore, in an e-mailed statement, Pdvsa said that Rothschild was one of several firms making proposals and that the firm had not approved the plan yet.
In this connection, authorities have openly been discussing the option of a voluntary debt swap for several months. According to the report, Pdvsa President Eulogio Del Pino in fact first commented on this possibility in a November 2015.
The report adds that Pdvsa has yet to appoint a firm to represent it in this liability management operation given that the amortizations in question will come due in just over three months.
Likewise, experts affirmed that similar expectations of a liability management operation preceded the October 2014 and 2015 amortizations yet failed to materialize.
At the time, they recalled that Pdvsa balked at carrying out these operations given their significant financial cost.
Furthermore, experts commented that at current market prices, the firm would have to issue twice the face value of the current outstanding ‘17N stock in new bonds similar to the ‘24s in order to offer a deal that is net-present value neutral to investors.
In other words, even if the firm offers a 12.75% coupon (instead of the ’24s current 6% coupon), it would have to accept an increase of at least 23% in the face value of the refinanced debt.
For the experts, Pdvsa’s apparent reticence to endorse the swap proposals at this late stage suggests that it may prefer to directly honor the obligations with a cash payment as it has done in previous years.
They said, however, that the large cuts in Pdvsa transfers to the Central Bank of Venezuela (BCV) over the course of the year suggest that, despite lower oil prices, Pdvsa may have managed to accumulate enough cash holdings so as to honor the payments in October and November.
It is worth mentioning that last week Venezuelan oil traded at USD 37.60 per barrel and has maintained an average price of USD 31.5.
The specialists even indicated that Pdvsa is likely to pay the Pdvsa pension fund and other state-controlled entities with new liabilities, as it has recurrently done in prior years.
The experts underscored that, according to Pdvsa’s financial statements, USD 565million of the USD 1billion outstanding ’16 bond were acquired by the Pdvsa Pension Fund in 2013.