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"Nevertheless, we expect PDVSA to ultimately adjust the exchange ratio upwards to ensure adequate bondholder participation," he added.

CORRECTED-UPDATE 1-Venezuela's PDVSA bonds fall after swap proposal unveiled

(Corrects paragraph 3 to read 2017 bond instead of 2107)
By Eyanir Chinea
Venezuelan state oil company PDVSA's bonds fell on Monday in an unenthusiastic market reaction to the borrower's $7.1 billion debt swap offer.
Under the exchange proposal unveiled on Friday evening, the new 2020 bond carries a 8.5 percent coupon and can be swapped with bonds maturing in November 2017 and April 2017.
The new bond's coupon is higher than the April 2017 bond's 5.25 percent coupon but matches that of the November 2017 bond.
As an incentive for investors, PDVSA is offering shares of its U.S. CITGO Holdings unit as a collateral guarantee, but Venezuela's opposition, which controls parliament, has indicated it will oppose that.
"There it is, on the table," PDVSA head Eulogio Del Pino told the company's TV channel on Monday. "An exchange that favors those who decide to stick with us a short while more. Those who decide not, we are willing to fulfill our (payments)."
Despite that upbeat tone, the November 2017 debt bond fell 2.45 points, or 2.9 percent, to a bid price of 76.35, while the April 2017 bond was off 2.1 points or 2.7 percent, to 71.5.
Other PDVSA bonds were all down, with the benchmark 2022 bond off 1.3 points or 2 percent, to a price of 57.5, according to Thomson Reuters data.
Analysts said the offer, whereby $1,000 of 2017 paper can be swapped for the same amount of 2020 debt, and a paucity of details on the valuation of the CITGO collateral might account for the reaction from bondholders.
"The fact that the offer is at a 1-to-1 exchange ratio will surely disappoint some market participants, but the value of CITGO collateral and seniority to other PDVSA debt should not be underestimated," said economist Francisco Rodriguez, at Torino Capital.
"Nevertheless, we expect PDVSA to ultimately adjust the exchange ratio upwards to ensure adequate bondholder participation," he added.
After long fretting about possible default, investorsin recent months have grown more optimistic the OPEC member country will meet debt payments despite an economic crisis that has spawned triple-digit inflation and chronic product shortages.
Del Pino said he would be communicating directly with bondholders to discuss the offer.
"I'll be talking to them soon directly in their offices and I will show them the reality of PDVSA, the reality that is often distorted and hidden: cost reductions, financing we have obtained, financing strategies."
For example, he added, the company achieved in eight months its annual target of 30 percent cost reduction. (Reporting by Eyanir Chinea and Diego Oré; Writing by Andrew Cawthorne; Editing by W Simon)

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