PDVSA Bonds Hit Two Year High Following Swap Proposal

PDVSA’s bonds rose to a two-year high Monday after the Venezuelan state oil company announced a deal to swap US $5.325 billion of its debt due next year for securities maturing in 2020.

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By Lucas Koerner
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Caracas, September 28, 2016 (venezuelanalysis.com) – PDVSA’s bonds rose to a two-year high Monday after the Venezuelan state oil company announced a deal to swap US $5.325 billion of its debt due next year for securities maturing in 2020.

Under the terms of the deal, PDVSA will pay creditors 1.2 times the face value of November 2017 bonds and 1.17 the value those due in April 2017 in exchange for a new bond due in 2020.

Markets responded favorably to the proposal, with prices on April 2017 notes surging 4.8% to 79.65 cents and November 2017 bonds likewise rising 3.5% to 81.75 cents.

Earlier this month, PDVSA floated a previous offer to swap the full $7.1 billion worth of bonds due in 2017, but the deal was deemed unattractive by bondholders and analysts.

While the new deal will increase PDVSA’s debt by $1.1 billion, the state oil giant is hedging its bets on the recovery of world oil prices in the coming years.

Over the last year, oil-rich Venezuela has been hit by a deep economic crisis triggered by the collapse of global crude prices that has led to a hemorrhaging of the country’s foreign currency reserves, which have dropped to under $12 billion– their lowest level in 13 years.

Nonetheless, the South American country has repeatedly defied rumors of default, making good on a $1.5 billion debt payment in March.

In October and November, PDVSA must make further payments on bonds valued at $1.4 billion $2.8 billion, respectively.