25 de octubre de 2016 12:08 PM
Actualizado el 25 de octubre de 2016 16:06 PM
“Converting foreign currency bonds to local currency would of course be an event of default under the terms of the bond indentures and would trigger Credit Default Swaps,” said Chief Economist of Torino Capital, Francisco Rodríguez, in reference to a claim filed by company Corporation XT 46 with the Supreme Tribunal of Justice (TSJ).
“The claim argues that Article 128 of the Law on the Central Bank (of Venezuela), which stipulates that payments in foreign currency must be made in a currency of legal tender at the place of payment, allows (state-run oil company Petróleos de Venezuela) Pdvsa to pay in bolivars the coupons and amortizations of its foreign currency bonds,” according to Rodríguez’s report.
“Coming as it did on the eve of Friday’s (since extended) deadline for Pdvsa’s exchange offer for its two issuances due on 2017, and given that the claim explicitly referenced these issuances (as well as the Pdvsa 2016 bonds due October 28), the news generated concern that the government may have been looking for ways to avoid upcoming payments (…),” the economist noted.
“Thus, while the plaintiff’s argument that the bonds could be acquired in bolivars does not hold at the time of issuance, it is nevertheless true that their issuance enabled the government to provide access to dollars via bond ownership at preferential rates,” Rodríguez stated.