PDVSA Default Talk Might Be a Bluff, But Some Traders Are Uneasy
- Company wants to swap as much as $5.325 billion of debt
- Deadline for investors to accept exchange extended to Friday
In the wake of Petroleos de Venezuela SA’s implicit threat to default if it doesn’t get debt relief, some creditors are prepared to call the oil company’s bluff.
Lutz Roehmeyer, who oversees about $12 billion at Landesbank Berlin Investment, says he won’t exchange his PDVSA notes for longer-maturity securities despite the company’s warning Monday that it may have to halt payments if more bondholders don’t agree to its proposed swap.
That comes as the cash-strapped crude producer extended its deadline for investors to exchange as much as $5.325 billion of bonds for a third time after falling “substantially” short of its goal of swapping at least half of its securities due in 2017.
“I don’t think a default is closer,” Roehmeyer said. “What has changed over the past month in fundamentals? Not much. This is the usual moral persuasion to convince investors to participate. PDVSA has to make some threat or introduce a sweetener to increase participation.”
In a conference call on Tuesday, PDVSA reiterated that it won’t improve its offer, according to Jorge Piedrahita, the chief executive officer of brokerage Torino Capital LLC. Venezuela is ratcheting up pressure on bondholders to take the deal as its economy reels from depressed oil prices, dwindling hard currency and political infighting.
PDVSA didn’t immediately respond to a request for comment on speculation that it’s bluffing.
Bonds issued by PDVSA and Venezuela’s government declined after Tuesday’s call, with longer-dated notes posting the biggest losses. The company’s $4.1 billion of securities due in November 2017 slipped 1.58 cent to 84.23 cents on the dollar, while bonds maturing in 2035 sank 2.66 cents to 43.11 cents.
Knossos Asset Management’s Daniel Urdaneta, who was also on the call, said it’s hard to tell whether the company’s default talk is just that. He said his Caracas-based hedge fund had already agreed to participate in the debt exchange.
After initially offering investors $1,000 of the new securities for every $1,000 of the old bonds, PDVSA on Sept. 26 improved the deal by pledging $1,170 of the April 2017 securities tendered before the early deadline and $1,220 for the November 2017 bonds.
Despite increasing speculation that Venezuela and PDVSA would default in recent years, the country and the company have always managed to defy the odds and honor their bonds.
“It’s either a very high-stakes bluff or the unraveling of a house of cards at the worst possible moment,” Urdaneta said. “They’ve done so much to keep servicing their debts. It just seems crazy that they’re going to fail now.”
--With assistance from Filipe Pacheco and Christine Jenkins.
To contact the reporters on this story:
Ben Bartenstein in New York at bbartenstei3@bloomberg.net;
Christine Jenkins in Bogota at cjenkins28@bloomberg.net
Ben Bartenstein in New York at bbartenstei3@bloomberg.net;
Christine Jenkins in Bogota at cjenkins28@bloomberg.net
To contact the editors responsible for this story:
Brendan Walsh at bwalsh8@bloomberg.net;
Michael Tsang at mtsang1@bloomberg.net
Brendan Walsh at bwalsh8@bloomberg.net;
Michael Tsang at mtsang1@bloomberg.net
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