Bondholders yet to receive payment on PDVSA 2020 bond: sources

FAN Editor
FILE PHOTO: The logo of the Venezuelan state oil company PDVSA is seen at a gas station in Caracas
FILE PHOTO: The logo of the Venezuelan state oil company PDVSA is seen at a gas station in Caracas, Venezuela March 2, 2017. REUTERS/Carlos Garcia Rawlins/File Photo

October 30, 2017

By Corina Pons and Brian Ellsworth

CARACAS (Reuters) – Bondholders have not yet received an $842 million payment that Venezuelan state oil company PDVSA said on Friday it had made on its 2020 bond, six market sources said on Monday, further fueling doubts about the cash-strapped company’s finances.

PDVSA [PDVSA.UL] has not in recent memory delayed a principal payment on any of its bonds despite triple-digit inflation and a collapsing socialist economic system. Concerns over possible default have made Venezuela and PDVSA bonds among the highest-yielding of any emerging market securities.

PDVSA on Friday said it had sent the funds to accounts at JPMorgan to cover an amortization on the bond, without saying if it had paid a $143 million coupon due on the same date.

The announcement that the bond would be paid eased worries of default after sources close to the government said it had considered not paying. But it would leave the cash-strapped administration with less cash to attend to economic woes.

One market source said he had been told that the funds were at JPMorgan and that payment would likely be credited by Wednesday, but added that the delay was concerning because “PDVSA has never delayed a principal payment.”

The source said the transfers have never previously taken more than one day to complete.

JPMorgan declined to comment. PDVSA did not immediately respond to an email seeking comment.

The PDVSA 2020 prospectus lists the paying agent – the financial institution which receives funds from the company paying the bond – as Law Debenture Trust Company of New York.

An official for Law Debenture contacted by Reuters last week said the paying agent role had passed to Delaware Trust, which acquired Law Debenture last year.

A public relations manager for digital branding firm CSC, the parent company for Delaware Trust, did not immediately respond to an email asking if Delaware Trust had received the funds and seeking to confirm that it is indeed the paying agent.

Market reaction to the delay was relatively muted compared with wild swings in bond prices last week.

PDVSA bonds were down slightly in afternoon trading, with PDVSA’s 2020 bond <716558AH4=> falling 1.375 percentage points to a bid price of 83.750. Venezuela’s sovereign bonds were mixed.

Venezuela and PDVSA together are now behind on nearly $750 million in coupon payments, according to two of the sources, including the missing coupon for the 2020 bond from Friday.

That is the result of repeatedly using the 30-day grace periods for bond interest payments during the month of October.

President Nicolas Maduro says the country is victim of an “economic war” led by political adversaries, and insists default rumors are a campaign against his socialist administration.

His critics say failed socialist policies including price controls, state takeovers of private companies and heavy borrowing during the oil boom are to blame for the OPEC nation’s predicament.

(Reporting by Corina Pons and Brian Ellsworth in Caracas, and Paul Kilby and Davide Scigliuzzo in New York, editing by Rosalba O’Brien)

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