24.10.2016, 22:26
PdV ekes out partial bond swap
OREANDA-NEWS. Venezuelan state-owned PdV executed a partial swap of its near-term dollar-denominated debt, eluding a breach of its financial obligations for now.
The oil company said today it will exchange $2.79bn of the $7.1bn it owes on two PdV 2017 bonds for a $3.36bn obligation in a new PdV 2020 bond.
The bond swap will be settled officially before the end of October.
PdV had extended a deadline for the restructuring on three occasions since early October, before finally securing a 39.43pc participation rate of the aggregate principal debt outstanding on the two 2017 bonds, short of a 50pc threshold it had originally targeted.
The bonds PdV sought to exchange include a $3bn note with a 5.25pc coupon that matures on 12 April 2017, and a second bond with an 8.5pc coupon on which $4.1bn of principal still was outstanding as of 16 September 2016.
PdV received offers to swap over $942.1mn or 31.40pc of the $3bn 2017 bond paying 5.25pc interest that matures next April. That leaves the company owing bondholders over $2bn of principal and interest on 12 April 2017.
PdV also received offers totaling over $1.82bn or 45.30pc of the second 2017 bond paying 8.5pc interest. Investors holding over $2.28bn of PdV's outstanding principal on this bond declined to participate.
The company owes $4.1bn of principal on this bond, including a $2.3bn payment due on 2 November 2016 that could be reduced to about $1.4bn when the bond swap is settled.
PdV also must pay a $1bn 2016 bond that matures in four days on 28 October.
PdV chief executive and energy minister Eulogio Del Pino said the operation succeeded "in spite of aggression to which the company was subjected."
"We reached 52.57pc of the maximum amount of the swap, an average 45.3pc of the capital to be amortized on the corresponding bonds through November 2017," Del Pino said.
Venezuela's government has a separate financial obligations on the horizon, including $600mn owed to Canadian mining company Gold Reserve on 31 October for expropriated assets.
Bond traders concurred that PdV's decision to execute the bond swap is a positive step, but the company is still under financial duress.
PdV's bond swap potentially reduces its debt load from this month to end-2017 "very slightly," but will not ease its operational problems from wellhead to terminal, one trader said.
"Low oil prices mean PdV isn't generating enough export income to pay its current expenses including maintenance, and also cover new capital expenditures, service its debts and fund the central government," the trader added.
It is also unclear how PdV plans to pay holders of the maturing PdV 2017 bonds that declined to exchange them for the new PdV 2020 bond.
Energy minister and PdV chief executive Eulogio Del Pino initially gave public assurances that PdV 2017 bondholders who chose not to swap for the new 2020 bond would be paid in full at maturity.
But Del Pino's chief of staff Rafael Rodriguez said in a conference call with investors last week that the energy minister never made such assurances, and hinted that no one would be paid if the bond swap failed.
Venezuela's supreme court also received an apparently private petition last week for a ruling on whether PdV legally could pay its maturing PdV 2016 and 2017 bonds with local currency, called the bolivar, instead of dollars.
Del Pino said the petition was part of a campaign to discredit the bond swap and hurt the country, but critics said the petition was quietly encouraged by the government to try to show it has financial alternatives.
The local currency option is widely dismissed as theoretically possible but impractical, because of transfer and convertibility issues, and because the largest local denomination is Bs100, while the black market rate is 1,200/$.
The swap coincides with a spike in political tensions after electoral authority CNE suspended a 26-28 October process to gather voter signatures to hold a referendum to remove Maduro from the presidency.
The opposition-controlled National Assembly was forced to suspend emergency sessions yesterday when hundreds of pro-government sympathizers broke through the legislature's security gates and mobbed the chamber.
The opposition Democratic Union coalition (MUD) has called for massive peaceful protests in Caracas and nationally on 26 October.
The turmoil broke out while Maduro himself is wrapping up a tour of Middle East oil- producing countries, seeking to drum up support for production restraints aimed at propping up oil prices.
The oil company said today it will exchange $2.79bn of the $7.1bn it owes on two PdV 2017 bonds for a $3.36bn obligation in a new PdV 2020 bond.
The bond swap will be settled officially before the end of October.
PdV had extended a deadline for the restructuring on three occasions since early October, before finally securing a 39.43pc participation rate of the aggregate principal debt outstanding on the two 2017 bonds, short of a 50pc threshold it had originally targeted.
The bonds PdV sought to exchange include a $3bn note with a 5.25pc coupon that matures on 12 April 2017, and a second bond with an 8.5pc coupon on which $4.1bn of principal still was outstanding as of 16 September 2016.
PdV received offers to swap over $942.1mn or 31.40pc of the $3bn 2017 bond paying 5.25pc interest that matures next April. That leaves the company owing bondholders over $2bn of principal and interest on 12 April 2017.
PdV also received offers totaling over $1.82bn or 45.30pc of the second 2017 bond paying 8.5pc interest. Investors holding over $2.28bn of PdV's outstanding principal on this bond declined to participate.
The company owes $4.1bn of principal on this bond, including a $2.3bn payment due on 2 November 2016 that could be reduced to about $1.4bn when the bond swap is settled.
PdV also must pay a $1bn 2016 bond that matures in four days on 28 October.
PdV chief executive and energy minister Eulogio Del Pino said the operation succeeded "in spite of aggression to which the company was subjected."
"We reached 52.57pc of the maximum amount of the swap, an average 45.3pc of the capital to be amortized on the corresponding bonds through November 2017," Del Pino said.
Venezuela's government has a separate financial obligations on the horizon, including $600mn owed to Canadian mining company Gold Reserve on 31 October for expropriated assets.
Bond traders concurred that PdV's decision to execute the bond swap is a positive step, but the company is still under financial duress.
PdV's bond swap potentially reduces its debt load from this month to end-2017 "very slightly," but will not ease its operational problems from wellhead to terminal, one trader said.
"Low oil prices mean PdV isn't generating enough export income to pay its current expenses including maintenance, and also cover new capital expenditures, service its debts and fund the central government," the trader added.
It is also unclear how PdV plans to pay holders of the maturing PdV 2017 bonds that declined to exchange them for the new PdV 2020 bond.
Energy minister and PdV chief executive Eulogio Del Pino initially gave public assurances that PdV 2017 bondholders who chose not to swap for the new 2020 bond would be paid in full at maturity.
But Del Pino's chief of staff Rafael Rodriguez said in a conference call with investors last week that the energy minister never made such assurances, and hinted that no one would be paid if the bond swap failed.
Venezuela's supreme court also received an apparently private petition last week for a ruling on whether PdV legally could pay its maturing PdV 2016 and 2017 bonds with local currency, called the bolivar, instead of dollars.
Del Pino said the petition was part of a campaign to discredit the bond swap and hurt the country, but critics said the petition was quietly encouraged by the government to try to show it has financial alternatives.
The local currency option is widely dismissed as theoretically possible but impractical, because of transfer and convertibility issues, and because the largest local denomination is Bs100, while the black market rate is 1,200/$.
The swap coincides with a spike in political tensions after electoral authority CNE suspended a 26-28 October process to gather voter signatures to hold a referendum to remove Maduro from the presidency.
The opposition-controlled National Assembly was forced to suspend emergency sessions yesterday when hundreds of pro-government sympathizers broke through the legislature's security gates and mobbed the chamber.
The opposition Democratic Union coalition (MUD) has called for massive peaceful protests in Caracas and nationally on 26 October.
The turmoil broke out while Maduro himself is wrapping up a tour of Middle East oil- producing countries, seeking to drum up support for production restraints aimed at propping up oil prices.
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