Venezuelan State Electric Company's Trustee Declares Default

Venezuela’s state electricity company was declared in default by the trustee for its bonds after it failed to make a $27.6 million interest payment, Bloomberg News reported. The electric utility, however, said that the cash was sent Nov. 8 and was being held up due to “operational changes.” Traders had long suspected that Elecar’s $650 million in notes coming due next year could be a candidate for the cash-strapped government to stop paying as it struggles to stay current on its debt. They don’t contain cross-default clauses that would impact securities from the sovereign or state oil company PDVSA, and the utility doesn’t have overseas assets, meaning there isn’t much investors can attempt to seize to get their money back. Traders have been searching for clues on Venezuela’s strategy since President Nicolas Maduro’s confusing announcement last week that he would seek debt-relief talks while still continuing to service existing bonds, and Elecar’s statement that it had made the payment only added to the mystery. Read more.