Bonds from Petroleos de Venezuela SA surged to a two-year high as oil minister Eulogio Del Pino said the state-owned oil company is close to announcing a $7 billion plan to exchange notes due this year and next for debt with a longer maturity.
PDVSA’s $3 billion of bonds due in April 2017 rose 2.88 cents to 71.15 cents on the dollar at 2:55 p.m. in New York, reaching the highest level since September 2014.
Pushing back the due date on its debt would give PDVSA some breathing room after a plunge in oil prices, decline in crude output and deep economic recession fueled speculation the producer would struggle to make good on its obligations -- including $4.1 billion due by January. The company might use its U.S.-based Citgo Petroleum Corp. unit as collateral to encourage investors to participate in the swap, Reuters reported on its Twitter feed today, citing unidentified people.
Bond rating companies have welcomed the swap, which would be for PDVSA notes due in October 2016, April 2017 and November 2017, Del Pino said on state television. More than five banks had offered the company their services, he said. There is a combined $8.1 billion of the notes outstanding.
PDVSA is scheduled to make $7.5 billion of debt payments next year. With earnings before some items of just $9.3 billion in 2015, the company is betting oil prices will recover in coming years, leaving it in a better position to pay off its obligations.
With an average annual yield of 30 percent, PDVSA bonds have returned 41 percent this year, more than four times the average for emerging-market corporate bonds.