Venezuela ruled in default by trade group after bond payment delays

Frederick Owens
November 18, 2017

But unlike Argentina, which battled creditors in U.S. courts for over a decade after its 2002 default, Venezuela has valuable assets in the USA at risk of seizure, including oil exports and Citgo with its three refineries, owned by PDVSA.

The government signed a 10-year restructuring deal with Russian Federation on Wednesday for a little over $3 billion in official debt, but observers say that will at best help resolve some payments in the short-term.

The ministry added that the debt restructuring agreement will allow Venezuela to allocate more funds for economic development. "This deal strengthens the relations between our two countries", Venezuelan vice president for the economy Wilmar Castro Soteldo told a press conference in Moscow.

Delays in payments on Venezuela's sovereign debt and bonds issued by state oil company PDVSA constitute a "credit event", triggering payouts on credit default swaps (CDS), a New York-based derivatives group ruled on Thursday. The Venezuelan Government ratified its proposal of a reliable, open and organized mechanism for restructuring the foreign debt, in order to keep its historic tradition as a solvent country that honors all its pledges.

Stichting Administratiekantoor Inversiones Petroleras Iberoamericanas will have a 40 percent participation in the project, the official government gazette said, without giving any financial details of the deal.

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Two ratings agencies declared President Nicolas Maduro's government in "selective default" earlier this week for failing to make overdue coupon payments within a grace period. ONGC, which is owed dividends for the Sana Cristobal heavy oil project, said PDVSA will use existing crude oil customers or Indian state buyers as intermediaries for payments.

Caracas has only US$9.7 billion in foreign reserves and needs to pay back at least US$1.47 billion in interest on various bonds by the end of the year, and then about US$8 billion in 2018.

The unpaid obligations total $420 million, the agency said.

PDVSA also said it has made the interest payment on its 2027 bond and has "successfully completed" capital payments on the 2020 and 2017N bonds. News of the deal broke days after Maduro held meetings with creditors to refinance $60 billion in national debt.

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