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Pdvsa views hard debt payment in the event of failed swap offers

The state-owned oil company Petróleos de Venezuela extends deadline for bonds for the third time

Todos los poseedores de Bonos PDVSA con este vencimiento, deberán dirigirse a su banco custodio o a la institución en donde adquirieron dichos bonos

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19 de octubre de 2016 12:42 PM

Actualizado el 19 de octubre de 2016 13:04 PM

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Pdvsa views hard debt payment in the event of failed exchange offers 

State-run oil company Petróleos de Venezuela (Pdvsa) in a communiqué warned that “should exchange offers prove unsuccessful, it could be difficult for the company to make scheduled debt payment, including existing bonds.”

Pdvsa announced the extension, for the third time, of the early deadline and exchange offers of up to USD 5.32 billion of the aggregate principal amount of 5.250% for April bonds maturing in 2017, and 8.50% of bonds maturing in 2017, together with April 2017 bonds (existing), for new 8.50% bonds maturing in 2020 (new).”

The company added that “the early tender period had been slated until 5:00 p.m., October 17, 2016, New York time.”

Similarly, the document read that Pdvsa “is extending both the early tender period and the deadline at 5:00 p.m., New York time, October 21, 2016, unless they are put off by Pdvsa at its sole and full discretion. All other terms and conditions relate to the offer remain unchanged.”

“Improvement of exchange offers is conditioned, among other things, to the valid offer of at least 50% of the aggregate principal amount of existing bonds.  By the previous early deadline, a percentage substantially below 50% of the aggregate principal amount had been offered,” Pdvsa explained.

According to economic research firm Boungy, such changes are due to holdouts.

In that regard, Boungy argued that “this fact puts pressures on a downtrend in Pdvsa bonds, which fell by 1.48 points, followed by Pdvsa 2022 and 2021 bonds with 3.10 and 2.85 points, respectively.”

Francisco Rodríguez, chief economist of Torino Capital firm, said that “re-launching the offer after November 2 would allow the government to clarify the proposed Citgo participation in joint ventures,” an initiative Pdvsa would be fostering with its foreign subsidiary to produce crude oil locally.

He claimed that “the government could sell the 2020 bond in a private issuance to the Central Bank and then let the central bank sell a small fraction of the new issuance in the secondary market. This would help establish the market valuation of the new bond and help investors resolve uncertainty around the pricing of the exchange offer.”

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