The Venezuelan government wants bondholders to come to Caracas Monday to restructure debt as it scrounges for cash.
DJ U.S. Warns Russia, Bondholders on Venezuela Debt Negotiations -- Barron's Blog
Friday, November 10, 2017 12:44 am
By Dimitra DeFotis
The Venezuelan government wants bondholders to come to Caracas Monday to
restructure debt as it scrounges for cash.
But the U.S. government warned late Thursday that if Venezuela's vice
president -- named by President Nicolas Maduro as a debt meeting host last week
-- or other sanctioned individuals are at the table with Americans, the
tete-a-tete could be a violation of U.S. sanctions.
Venezuela seems to have avoided a default this week after Russia said
Wednesday that it would restructure $3 billion in loans to Caracas to free up
money for payments that are past due. But if Russia seeks to renegotiate loans
tied to Venezuela's Citgo refining subsidiary in the United States, Americans
and people in the U.S. can't negotiate without permission from the U.S. Office
of Foreign Assets Control. Here's the OFAC language explaining rules on
refinancing bonds issued by the Venezuelan government and state oil company:
"U.S. persons are generally prohibited from engaging in transactions or
dealings with persons named on OFAC's specially-designated nationals (SDN)
list, including dealing with an SDN in the context of efforts to restructure
Venezuelan and Petroleos de Venezuela, S.A. (PdVSA) debt."
OFAC also reminded bondholders that even if the Venezuelan negotiators aren't
on the U.S. sanction list, renegotiating new long-term bonds is forbidden. More
OFAC language: "General License 3 does not authorize any transaction by a U.S.
person or within the United States that involves the creation or subsequent
dealing in new debt of PdVSA or the Government of Venezuela with a maturity of
greater than 90 days or 30 days, respectively, absent a license from OFAC."
Over the past three years, Russia has provided Caracas with $10 billion in
financial assistance, the New York Times calculates. As collateral on one loan,
Russian oil company Rosneft ( ROSN.ME) gained a 49.9 percent stake in Citgo,
Venezuela's U.S. refining subsidiary. The U.S. government includes subsidiaries
in its ban on debt negotiations.
The U.S. government sanctioned 10 more Venezuelans Thursday who allegedly
committed fraud to undermine Oct. 15 state elections.
The iShares J.P. Morgan U.S. Dollar Emerging Markets Bond exchange-traded
fund ( EMB) has slipped 0.9% this week and the VanEck Vectors Emerging Markets
High Yield Bond ETF ( HYEM) is down 0.2%, while the iShares Latin America 40
ETF (ILF) is up 0.7%.
Friday, November 10, 2017 12:44 am
By Dimitra DeFotis
The Venezuelan government wants bondholders to come to Caracas Monday to
restructure debt as it scrounges for cash.
But the U.S. government warned late Thursday that if Venezuela's vice
president -- named by President Nicolas Maduro as a debt meeting host last week
-- or other sanctioned individuals are at the table with Americans, the
tete-a-tete could be a violation of U.S. sanctions.
Venezuela seems to have avoided a default this week after Russia said
Wednesday that it would restructure $3 billion in loans to Caracas to free up
money for payments that are past due. But if Russia seeks to renegotiate loans
tied to Venezuela's Citgo refining subsidiary in the United States, Americans
and people in the U.S. can't negotiate without permission from the U.S. Office
of Foreign Assets Control. Here's the OFAC language explaining rules on
refinancing bonds issued by the Venezuelan government and state oil company:
"U.S. persons are generally prohibited from engaging in transactions or
dealings with persons named on OFAC's specially-designated nationals (SDN)
list, including dealing with an SDN in the context of efforts to restructure
Venezuelan and Petroleos de Venezuela, S.A. (PdVSA) debt."
OFAC also reminded bondholders that even if the Venezuelan negotiators aren't
on the U.S. sanction list, renegotiating new long-term bonds is forbidden. More
OFAC language: "General License 3 does not authorize any transaction by a U.S.
person or within the United States that involves the creation or subsequent
dealing in new debt of PdVSA or the Government of Venezuela with a maturity of
greater than 90 days or 30 days, respectively, absent a license from OFAC."
Over the past three years, Russia has provided Caracas with $10 billion in
financial assistance, the New York Times calculates. As collateral on one loan,
Russian oil company Rosneft ( ROSN.ME) gained a 49.9 percent stake in Citgo,
Venezuela's U.S. refining subsidiary. The U.S. government includes subsidiaries
in its ban on debt negotiations.
The U.S. government sanctioned 10 more Venezuelans Thursday who allegedly
committed fraud to undermine Oct. 15 state elections.
The iShares J.P. Morgan U.S. Dollar Emerging Markets Bond exchange-traded
fund ( EMB) has slipped 0.9% this week and the VanEck Vectors Emerging Markets
High Yield Bond ETF ( HYEM) is down 0.2%, while the iShares Latin America 40
ETF (ILF) is up 0.7%.
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