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Venezuela’s state-owned oil company Petroleos de Venezuela SA can’t seem to organize itself to pay its coupons on time, raising concern the cash-strapped driller may end up defaulting by mistake.
The company had four bond-interest payments totaling almost $540 million due last week. One it paid, two payments were delayed until this week, while PDVSA said it would have to use a grace period for the fourth. The company’s chairman Eulogio Del Pino, also the country’s oil and energy minister, appeared on a late night chat-show on state television where he blamed the delay on Citigroup Inc., but didn’t explain why the grace period was needed for the 2035 bond.
The state-owned company is reeling from low oil prices and plunging output at a time when the economy is near collapse and hard currency is scarce. The government says it’s caught up in an “economic war,” and that the U.S. Treasury Department is behind the delay.
“If you want to earn money you have to buy bonds of emerging markets, and the price of doing that is some excitement,” said Lutz Roehmeyer, a fund-manager at Landesbank Berlin Investment in Germany. “If you want to have your money on time: buy German bunds or US treasury bonds!”
The delayed payments point to a lack of organization and forward-planning at PDVSA that raises the risk of an accidental default in future, analysts Anne Milne and Jane Brauer at Bank of America Corp. wrote in a note to clients.
President Nicolas Maduro used his weekly salsa-music radio show to reiterate Del Pino’s claim that Citigroup was responsible for the delay.
“Behind all of this is the Treasury Department of the United States and the U.S. government,” Maduro said. “Obama has an obsession against Venezuela and an obsession against me.”
While last month’s bond exchange saved PDVSA about $2 billion through the end of next year, the crude producer still faces $6 billion in principal payments in the same period. In order to persuade investors to sign up to the exchange, Del Pino implied that the company might default if the deal failed, warning he would consider all options and that nothing was off the table.
The delay may be due to a “technical mistake” in the routing of payments, Torino Capital’s chief economist Francisco Rodriguez said in a report. PDVSA has likely used past Chinese loans to Venezuela to make some debt payments, and routing through unconventional accounts may have delayed crediting of paying-agent accounts, he wrote.
The payment on the 2035 debt is in the process of being made, within the terms and conditions of the bonds, the company said. PDVSA is availing itself of the 30-day grace period for late payment, Venezuelan oil minister Eulogio Del Pino said.
PDVSA’s bonds due in April 2017 fell to 85.08 cents on the dollar as of 1:50 p.m. New York time today from 86.76 cents at the end of last week. The 2035 bonds fell to 44.23 cents from 44.9 cents.
“PDVSA just went through a difficult debt swap negotiation, paid down significant amortization amounts in October, it would not make much sense to default a month later on much smaller debt obligations,” said Marcela Meirelles, an emerging-market strategist at TCW Group Inc. in Los Angeles. “This is why, I think, the market didn’t overreact.”
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