Venezuela wins easy debt terms from Russia, China vote of confidence

Venezuela won easier debt terms from Russia and got a vote of confidence from China on Wednesday, as the country said it had started making interest payments on bonds after a delay.

A debt restructuring deal with Russia that allows Caracas to make “minimal” payments to Moscow in the next six years, together with a separate statement from the Chinese Foreign Ministry that Venezuela was capable of handing the debt issue appropriately, underlines the support from both countries.

“Cooperation in financing and other fields between China and Venezuela is operating as usual,” Chinese Foreign Ministry spokesperson Geng Shuang said at a daily briefing on Thursday.

“We believe that the Venezuelan government and its people have the capability to properly handle their own affairs, including the debt issue.”

Venezuelan bond prices have been on a roller-coaster over the past 10 days, as President Nicolas Maduro called investors to debt restructuring talks, while pledging to keep honoring the country’s obligations.

On Wednesday, the Economy Ministry said it had started transferring $200 million in interest payments on those bonds, which mature in 2019 and 2024.

The 2019 bonds edged up 0.25 points or about 1 percent, while the 2024 bonds surged 2.25 points, or almost 10 percent, according to Thomson Reuters Eikon data. Separately, state oil company PDVSA said it had made interest payments on its 2027 bond and had “successfully completed” capital payments on its 2020 and 2017 bonds.

Derivatives industry group ISDA was set to hold a hearing on Thursday to discuss whether Venezuela and PDVSA have entered default due to the late payments, an ISDA spokeswoman said.

Under the deal with Russia announced earlier on Wednesday, Venezuela will pay it back a total of $3.15 billion over a 10-year period.

Maduro’s government has vowed to keep making payments responsibly.

The Russian Finance Ministry said the agreement should free up more funds to allow Venezuela to develop its economy and “will improve the debtor’s payment ability, increasing the chances of all creditors getting their loans back.”