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By Dimitra DeFotis
The U.S. market may be at all-time highs, but Venezuela seems to keep hitting new lows.
J.P. Morgan analysts Javier Zorrilla and Ben Ramsey report that the state-controlled oil company Petroleos de Venezuela or Pdvsa has asked for an allowed 30-day grace period in making payments on the PDVSA 9% 2021s [bonds maturing in 2021 that pay a 9% yield], PDVSA 6% 2024s and PDVSA 9.75% 2035s. It would have to miss the grace period before defaulting. However, they add:
” … Last week, Pdvsa had coupon payments amounting $539 million. As reported today by the paying agent (Citi) and Clearstream, Pdsva has only paid $135 million on the PDVSA’s 6.0% ’26 while other funds are still pending. PDVSA has not responded to our calls or emails. … we still believe PDVSA will make these payments during the grace period. We highlight that Venezuela has more than $10.86 billion reserves as of November 17th as reported by the Central Bank of Venezuela. However, this highlights the cash difficulties and mismanagement of PDVSA with regards to its liabilities …”
Emerging markets gained strength Monday, with the iShares Latin America 40 exchange-traded fund (ILF) up 3%, and the iShares MSCI Emerging Markets ETF (EEM) higher by 1%. Pdvsa bonds were among the top 25 holdings in the VanEck Vectors Emerging Markets High Yield Bond exchange-traded fund (HYEM) as of Sept. 30, according to Morningstar.com. Venezuelan government debt is among the top holdings in the iShares JPMorgan USD Emerging Markets Bond ETF (EMB).
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