Venezuela debt refinancing underway, S&P calls selective default

CARACAS/NEW YORK — Venezuela’s cash-strapped government said its plan to refinance some $60 billion in bonds was successfully underway after a creditors’ meeting in Caracas but a rating agency declared the nation in selective default over missed coupon payments.

Reuters

President Nicolas Maduro’s negotiating committee met briefly with investors in Caracas on Monday, but offered no firm proposals on its intention to alleviate Venezuela’s crippling foreign debt amid an unprecedented economic meltdown.

“The process of refinancing Venezuela’s foreign debt began with resounding success,” the socialist government said late Monday, complaining about US financial sanctions and unfair assessments from international rating agencies.

The 100 or so participants at Monday’s meeting included bondholders from Venezuela, the United States, Panama, Britain, Colombia, Chile, Argentina, Japan and Argentina, it said.

“The start of this refinancing of our debt ratifies our full intention to comply, as we have always done, with all our obligations,” the government statement added.
Bondholders saw things differently.

Participants in the meeting came away still confused over how Venezuela plans to avoid a default, given the parlous state of its finances, and how any refinancing could be worked out, given US President Donald Trump’s sanctions.

The US measures essentially block the issuance of any new Venezuelan debt, while there are also sanctions on its chief negotiators, Vice-President Tareck El Aissami and Economy Minister Simon Zerpa, on drug and corruption charges.

“Nothing of substance happened,” said Raymond Zucaro, chief investment officer at Miami-based RVX Asset Management, who did not attend Monday’s meeting. “The patient is still on a critical life support system.”

While Maduro has said repeatedly that Venezuela will honour all foreign debt, some analysts suspect he may in fact be laying the groundwork for a default that he can blame on Trump and the domestic opposition, who have lobbied for global pressure.

“He invites all bondholders down and then it becomes clear they’re not going to be able to work out a refinancing,” Jan Dehn, head of research at Ashmore Investment Management, said.

“He can say, ‘Well, look, I tried. I showed goodwill, the bondholders showed goodwill . . . everybody tried to get together but unfortunately because Uncle Sam is not playing ball we can’t do it.’”

Further complicating the situation, S&P Global Ratings declared Venezuela in selective default after it failed to make $200 million in coupon payments on its global bonds due in 2019 and 2024 within a 30-day grace period.

The agency warned there was a strong chance it would miss further payments within three months. —

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