Caracas is proposing that China pay cash for the principal on oil-backed debt for one year
OREANDA-NEWS. Caracas is proposing that China pay cash for the principal on oil-backed debt for one year, the latest in a series of cash-generating proposals aimed at replenishing the embattled government's depleted coffers.
Venezuelan energy minister Eulogio Del Pino will visit China soon to pursue a debt renegotiation package worth about $8bn in fresh cash and postponed payments on state-owned company PdV's oil-backed debt to China Development Bank (CDB), the energy ministry said today.
Del Pino is seeking an agreement with CDB and Chinese state-owned oil company CNPC to postpone principal payments on PdV's oil-backed debt for one year.
PdV pays Venezuela's oil-backed debt to China in crude, mainly 16°API Merey that is popular with Asian refiners. PdV shipped about 600,000 b/d to Chinese companies in 2015, of which roughly half was booked as oil-backed loan payments that did not generate any revenue for PdV, according to the energy ministry.
Del Pino's proposal to CDB calls for PdV to continue shipping crude to China to cover interest on the outstanding oil-backed debt payable for one year from the date an agreement is implemented.
But China during that one-year period would pay PdV fully in cash for the portion of crude shipments that previously were booked as principal payment on the oil-backed debt.
The one-year postponement of PdV's oil-backed debt principal payments to China would generate over $3bn in cash for PdV, easing pressure on the Venezuelan central bank's hard currency reserves, which have shrunk from almost $30bn since end-2012 to about $12bn, including less than $200mn in cash.
PdV expects to sign a deal within weeks on its requested one-year postponement of principal payments in crude, allowing it to build up cash reserves ahead of over $3bn in bond debt it must pay at the end of October and early November, the energy ministry said.
But PdV has to make bond principal and interest payments totaling about $4bn during the rest of 2016, plus another $7.2bn due in 2017, according to the company's just-issued externally audited 2015 consolidated financial report.
Del Pino's proposal to CDB would help PdV cover the bulk of its remaining debt payments due in 2016 and allow him to focus on restructuring the scheduled bond and interest debt maturing in 2017.
Del Pino is also negotiating to renew a $5bn three-year oil-backed loan, one of three special China-Venezuela funds created since 2007 by Caracas and Beijing to manage disbursement of over $55bn in oil backed loans that CDB has granted Venezuela's central government and PdV over the past 11 years.
China's oil-backed loans to Venezuela have been used mainly to fund oil, power and other infrastructure projects in which Chinese engineering firms, contractors, equipment suppliers and imported skilled workers are directly involved.
Комментарии