Venezuela offers sops to creditors to renegotiate $60 billion debt
CARACAS: Venezuela’s socialist government provided sops to creditors, but offered no firm proposals at a brief meeting in Caracas that left investors without a clear understanding of the government’s strategy to renegotiate $60 billion debt.
President Nicolas Maduro confused investors this month with a vow to continue paying Venezuela’s crippling debt, while also seeking to restructure and refinance it. Both restructuring and refinancing appear out of the question, however, due to US sanctions against the crisis-stricken nation. A default would compound Venezuela’s dire economic crisis.
Monday’s short and confused meeting, attended by senior Venezuelan officials blacklisted by the United States, gave no clarity on how Maduro would carry out his plan, bondholders and their representatives who participated said afterwards.
That means Venezuela remains with the dilemma of whether to continuing paying debt at the expense of an increasingly hungry and sick population, or defaulting on creditors and burning its bridges to the global financial system.
“There was no offer, no terms, no strategy, nothing,” said one bondholder, leaving the meeting that lasted a little over half an hour at the ‘White Palace’, departing with a colorful gift-bag containing Venezuelan chocolates and coffee. But bond prices maintained last week’s rally, with one investor saying there was relief the meeting did not include a default announcement.
Nearly $300 million in late interest payments on three bonds - PDVSA 2027, Venezuela 2019 and Venezuela 2024 - was also due on Monday after 30-day grace periods ended. But bondholders appeared unconcerned at the delay, which was due in part to increased bank vigilance of Venezuela transactions.
“My expectation is that the coupon payments will come through as well,” said Jan Dehn, Head of Research at Ashmore Investment Management. “We know that these delays exist and why they exist.”
About 100 investors, including some bondholders from New York and lawyers representing creditors, entered the ‘White Palace’ via a red carpet and were greeted by a poster of Maduro’s predecessor Hugo Chavez at the entrance of the meeting room inside.
Chief debt negotiators Vice President Tareck El Aissami and Economy Minister Simon Zerpa on US sanctions lists for drug and corruption charges respectively attended the meeting for half an hour.
They met with some bondholders, while others stayed out of the room on concerns about penalties for dealing with officials sanctioned by Washington.
El Aissami told creditors that Deutsche Bank may soon cut off some financial services to Venezuela, participants said. Deutsche declined to comment.
He read a statement protesting unfair treatment by global financial institutions, including US President Donald Trump’s sanctions aimed at preventing Venezuela from issuing new debt.
“Now Maduro can say: ‘I showed goodwill, the bondholders showed goodwill ... but unfortunately because Uncle Sam is not playing ball we can’t (refinance)’,” said Dehn, who did not attend the meeting. “I’m not hugely surprised nothing’s come out of that meeting.”
Separately, the European Union approved economic sanctions and an arms embargo on Venezuela on Monday, although it has yet to name who will be subject to the sanctions. Markets continue to remain optimistic that Venezuela will service its debts, noting it has made close to $2 billion in payments in the past two weeks, albeit delayed. Bond prices were up across the board on Monday, with the benchmark 2022 notes issued by state oil firm PDVSA rising 3.3 per centage points.