Venezuela says debt refinancing under way, S&P calls selective default

From Reuters - November 14, 2017

CARACAS/NEW YORK (Reuters) - Venezuelas cash-strapped government insisted it had successfully begun efforts to refinance some $60 billion in bonds, though creditors disagreed following fruitless talks and a ratings firm declared the nation in selective default.

Venezuelan bonds slid on Tuesday after S&P Global Ratings announced that Venezuela was in selective default for failing to make $200 million in overdue coupon payments on its 2019 and 2024 global issues within a 30-day grace period.

Investors, meanwhile, voiced concern after President Nicolas Maduros negotiators met briefly with bondholders in Caracas on Monday but failed to present firm proposals to alleviate the OPEC nations crippling foreign debt amid an unprecedented economic meltdown.

The process of refinancing Venezuelas foreign debt began with resounding success, the socialist government said late Monday, complaining about U.S. financial sanctions and what it called unfair assessments from international ratings agencies.

The government repeated pledges to honor all its foreign debt and said Mondays talks were attended by 100 or so participants, including bondholders from Venezuela, the United States, Panama, Britain, Colombia, Chile, Japan and Argentina.

However, attendees at the meeting came away confused over how Venezuela plans to avoid a default, given its parlous state finances, and how any refinancing could be worked out amid U.S. President Donald Trumps sanctions.

The U.S. measures block the issuance of any new Venezuelan debt and impose sanctions on the countrys chief negotiators, Vice President Tareck El Aissami and Economy Minister Simon Zerpa, on drug and corruption charges.

Venezuela has dismissed those accusations as politically motivated fabrications by Washington to tarnish the countrys reputation.

The bondholder meeting in Venezuela was a non-event, lasting only 20-30 minutes with reports of only 10 non Caracas-based investors...and the only official that spoke was drug kingpin VP Tareck El Aissami said Siobhan Morden, head of Latin American fixed-income strategy at Nomura, who did not attend.

Four years of recession in the South American nation, fueled by failing socialist economics and a plunge in global oil prices, have hit Venezuelans hard. Many skip meals or suffer from malnutrition and preventable diseases, due to severe shortages of food and medicine and triple-digit inflation.

With some $9 billion in payments looming for 2018, a default would be a short-term relief for the government, enabling Maduroto spend on desperately-needed food and medicine imports ahead of next years presidential election.

But that strategy could also backfire if it sparks aggressive legal challenges from abroad, including moves to seize assets of state oil company PDVSA, [PDVSA.UL] which is the cash-cow for Venezuelas socialist system.


Despite concern that U.S. sanctions could prevent Venezuela hiring advisors, the government has appointed lawyer David Syed - a former partner at Orrick, Herrington & Sutcliffe - to advise it, working alongside a team at global law firm Dentons, according to IFR, a Thomson Reuters news service.


Continue reading at Reuters »