Venezuela of­fers sops to cred­i­tors to rene­go­ti­ate $60 bil­lion debt

The Gulf Today - Business - - INTERNATIONAL -

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.”

IN­VESTORS’ MEET­ING

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.

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