Venezuela debt defaults pile up with fresh S&P warning

CARACAS: Venezuela moved closer to a possible all-out default, with ratings agency S&P Global saying the country had failed to make repayments on two more loans.

The oil-rich, cash-poor South American country failed to make US$237 million in payments on bonds due 2025 and 2026, now past their 30-day grace period, the US ratings firm said in a statement.

It warned of a “one- in- two chance that Venezuela could default again within the next three months.”

“Two additional coupon payments are overdue, but within their grace period. We could lower the ratings on the following issues to ‘D’ if the government fails to pay within the stated grace period,” S&P Global said.

It and other ratings agencies had already declared Venezuela and state-owned oil company PDVSA to be in “selective default” due to the late payments on multiple bond issues.

The piling up of bad debt pushes Venezuela ever closer to a point when either it will declare outright default of all its sovereign and PDVSA debt – or creditors do.

Such a scenario could see creditors’ lawyers line up in US courts to demand the right to seize Venezuelan assets abroad.

If PDVSA tankers, oil shipments and refineries were grabbed, that would cripple Venezuela’s ability to sell its crude – and the oil company is the primary source of income for the country, which sits atop the world’s biggest oil reserves.

The country has an estimated debt burden of up to US$150 billion, yet less than US$10 billion in hard currency reserves.

It had been up- to- date on principal payments on its loans until early this month, when Venezuela’s President Nicolas Maduro said he wanted to restructure the sovereign and PDVSA debt.

The country has to pay back at least US$1.47 billion in interest on various bonds by the end of the year, and then about US$8 billion in 2018.

S& P said it would “very likely” consider any Venezuelan restructuring equivalent to a default.

“In addition, in our opinion, US sanctions on Venezuela and government members will most likely result in a long and difficult negotiation with bondholders,” it said.

ThesanctionsfromWashington, which has labeled the Maduro regime a dictatorship, prohibit US individuals and banks from buying new Venezuelan bonds, usually a requirement for any debt resolution. — AFP