CARACAS, Venezuela -- State oil producer Petróleos de Venezuela SA said Monday it has concluded a deal to swap almost $3 billion of upcoming bonds for those with longer maturity, a move that Wall Street analysts say reduces chances of default next year.
The company, known as PdVSA, has managed to obtain the minimum required participation at last minute after having to extend the deadline three times, sweeten the terms and reduce the amount of tendered bonds. The company will swap $2.8 billion bonds maturing in 2017, or about 52% of the tendered amount, for $3.4 billion bonds due in 2020, it said in a statement.
Prices for PdVSA'S April 2017 bonds edged up 1.3% to 80.55 cents on the dollar at 1 p.m. in New York on Monday. The PdVSA bonds due November 2017 added 1.5% to 83.90 cents.
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Venezuela's sovereign bonds, which closely track PdVSA's debt, are the best performers in emerging markets this year, giving investors a 46% return through Friday, despite the country's deepening political crisis and economic woes.
The swap gives investors a chance to enjoy these returns for longer, while giving the company "breathing space" to stabilize production, PdVSA President Eulogio del Pino said in an interview last week.
"The swap extends the party," said Francisco Ghersi, co-founder of Venezuela-focused Knossos Asset Management hedge fund, who took up the swap offer. The new bonds maturing 2020 can be dumped quickly if the country's economy deteriorates further, he said.
PdVSA will guarantee the new 2020 bonds with 50.1% of the shares in its U.S. subsidiary Citgo Holdings.
The swap will reduce Venezuela government's debt load from about $15 billion to $13 billion between now and end-2017.
"They should have enough room for maneuvers to make it through next year, " said Francisco Rodriguez, chief economist at emerging markets brokerage Torino Capital. "Deeper structural reforms are needed" to stabilize the company's cash flow in the longer term, he said.
The bonds will be swapped on Oct. 27, PdVSA said.
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