Venezuela's PDVSA bonds mostly down, market awaits swap offer details
Venezuelan state oil company PDVSA's bonds were mostly down on Thursday as investors puzzled over the lack of details of a $7 billion debt swap proposal that could offer financial relief for the cash-strapped company.
PDVSA on Tuesday announced a plan to replace bonds maturing in 2016 and 2017 with a new bond maturing in 2020 that will be backed by shares in its U.S. refining unit Citgo and its president invited bondholders to survey the prospectus online.
But by early Thursday afternoon, the Caracas-based company had not yet published the prospectus, confusing Wall Street.
"The market is starting to think there are hurdles with the 'go' for the emission," said Venezuelan economist Asdrubal Oliveros on Twitter.
PDVSA's 2017N bond, which is part of the swap offer, was up 0.3 points to a bid price of 78.80, but most of the company's other bonds were down.
"Of course they're falling because (of the delay). Patience has its limits," said one bondholder. The two 2017 bonds are up, he added because "if the swap is successful the 2017s will be the crown jewels."
Calls and requests for comment from PDVSA went unanswered.
After long fretting about possible default, investors in recent months have grown more optimistic that the OPEC member will meet debt payments despite an economic crisis that has spawned triple-digit inflation and chronic product shortages.
President Nicolas Maduro notes that the ruling Socialist Party has never missed a bond payment and calls default speculation part of a U.S.-backed smear campaign by adversaries to weaken his government.
A potential debt swap would alleviate PDVSA's debt burden in the short term.
"We believe that the most likely scenario is that the government will pay, not only the next two large principal payments in October/November 2016 and April 2017, but also we see a reasonable chance that it pays the October 2017 payment, even greater if the swap is successful," Bank of America said in a note to clients on Thursday.
Still, Venezuela's opposition jumped on the prospectus delay as a sign PDVSA was not capable of overseeing the swap operation.
"The delay in PDVSA publishing suggests two things: irresponsibility or that something strange is happening with the swap," said opposition lawmaker and economist Jose Guerra. (Reporting by Alexandra Ulmer and Corina Pons; editing by Grant McCool)
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