Maduro Asks Venezuela Bondholders to Meet After U.S. Sanctions

By Jose Orozco

• Meeting to find solutions to U.S. sanctions affecting bonds
• Maduro also invites U.S. oil companies to meet on sanctions

(Bloomberg) --

President Nicolas Maduro summoned holders of Venezuelan bonds to a meeting with Economy Minister Ramon Lobo next week to discuss the effects of U.S. sanctions aimed at sovereign and state oil company debt.

U.S.-based holders of Venezuela bonds will be hurt the most by the sanctions, Maduro said. President Donald Trump “burned the bonds in their hands” by trying to harm Venezuela, he said, without providing more details on the meeting.

“Attention, holders of Venezuela bonds,” Maduro said on state television. “I summon you through finance vice president Ramon Lobo to a meeting next week to find solutions to the damage inflicted by Trump on the holders of Venezuela bonds with this infamous and illegal order.”

The U.S. imposed sanctions barring trade of new debt issued by the Venezuelan government and state oil company Petroleos de Venezuela SA in U.S. markets and blocked dealing in some existing bonds owned by the country’s public sector to choke off funding to Maduro’s government, which is running out of money.

Venezuela and PDVSA are under intense scrutiny from investors as U.S. sanctions against key government officials and a power grab by Maduro threaten to disrupt financial flows in a country hit by a crippling recession and months of violent protests.

Bond Sanctions

The Treasury Department will issue licenses for some transactions “to mitigate harm to the American and Venezuelan people,” the White House said in a statement Friday. Trading would be allowed for the vast majority of existing Venezuelan bonds in secondary markets and will allow short-term financing for most commercial trade, such as the import and export of petroleum. But it will block the Venezuelan government from restructuring its debt with U.S. investors.

Torino Capital LLC said the ban on trading affects only one bond issued before Trump’s executive order. “The new sanctions have little to no effect on the market for existing bonds,” it said in an emailed note. “The only bond that is banned is one that is not currently traded.” 

The sanctions, however, make it “extremely difficult” for Venezuela or PDVSA to secure new financing by barring U.S. entities from operations that would provide Maduro’s government with new funds, Torino said in the note.

The sanctions also prevent entities such as PDVSA’s Houston-based refinery arm, Citgo Petroleum Corp., from issuing dividend payments back to Venezuela.

Trump’s executive order “practically declared the closing” of Citgo because sanctions hinder the company’s financial dealings, Maduro said. Venezuela will defend Citgo in the U.S., he added, without providing details.

Maduro called for additional meetings with U.S. buyers of Venezuela crude and U.S. companies working in the South American country’s oil sector to seek solutions to the circumstances created by the sanctions. Venezuela has other markets besides the U.S. to which it can sell its oil, Maduro said. 

“We want to keep selling to the United States, but it looks as if Donald Trump’s coercive measures of financial persecution seek to ban Venezuela from being a reliable supplier of oil,” Maduro said, adding that U.S. oil companies with investments in Venezuela should continue their projects and maintain partnerships with the state.

Related ticker:
PDVSA VC (Petroleos de Venezuela SA)