South America

As negative yields engulf everything from Brazil’s state oil company to Hungarian sovereign debt to euro junk, investors are seeking refuge in high-yield bond ETFs, Bloomberg News reported. Europe-listed funds have attracted over 5 billion euros ($5.6 billion) since January, more than in any full year going back to at least 2010, according to data compiled by Bloomberg Intelligence. The largest exchange-traded fund tracking the debt -- BlackRock Inc.’s 8.5 billion-euro IHYG -- took in 640 million euros in the week ended July 5, smashing a record it set just two weeks before, the data show.

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Loans to Venezuela from President Nicolas Maduro’s allies Russia and China would be renegotiated though the Paris Club if Maduro leaves power, an advisor to the opposition said on Wednesday, responding to concerns about favourable treatment for the two countries, Reuters reported. Ricardo Hausmann, who represents opposition leader Juan Guaido at the Inter-American Development Bank (IADB), said Guaido’s team has not determined how loans might be restructured under its governance because bilateral debt talks typically take place under the auspices of the Paris Club creditor group.

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Brazilian telecom carrier Oi SA disclosed on Tuesday a new strategic plan aiming to divest up to 7.5 billion reais ($2 billion) in non-core assets and focus on its fiber-to-home (FTTH) broadband service, Reuters reported. The company, which filed for bankruptcy protection in June 2016 to restructure approximately 65 billion reais of debt, plans to sell towers, data centers, real estate assets, its Angolan subsidiary Unitel and other non-strategic assets between 2019 and 2021.

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Who Can Pay Venezuela’s Debts?

Venezuela, and its state-owned oil company Petróleos de Venezuela SA, have stopped making payments on a lot of their debts. Many of these debts are in the form of bonds governed by New York law, and so bondholders have sued Venezuela in U.S. courts asking for their money back, a Bloomberg View reported. This is not, in sovereign debt cases, a foolproof approach: The court can tell Venezuela to give them their money back, but it can’t make Venezuela do it; Venezuela is its own country and doesn’t have to listen to U.S. courts.

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A Brazilian appeals court judge has allowed bank creditors of Odebrecht SA to take possession of shares in petrochemical company Braskem SA pledged as collateral for loans they made to the corruption-ensnared conglomerate, according to a document seen by Reuters. The new injunction, granted on Wednesday in favor of Brazil’s largest lender, Itau Unibanco Holding SA, overturns a ruling banning any sale or possession of Braskem shares by banks, Reuters reported. State-controlled lender Banco do Brasil has filed a similar request.

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Creditors holding Venezuelan debt on Tuesday pushed back on debt restructuring plans backed by opposition leader Juan Guaido, urging a “fair and effective” framework for talks and improved communications with investors holding defaulted bonds, Bloomberg News reported. Creditors holding Venezuelan debt on Tuesday pushed back on debt restructuring plans backed by opposition leader Juan Guaido, urging a “fair and effective” framework for talks and improved communications with investors holding defaulted bonds.

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The perceived risk of Latin America’s largest economy has dropped to a five-year low as President Jair Bolsonaro’s proposed overhaul of the country’s pension system nears a key vote in Congress, Bloomberg News reported. The cost to insure Brazil’s debt against default for five years narrowed to as low as 138 basis points over comparable U.S. Treasuries Tuesday morning, the tightest since September 2014, three months before the onset of a crushing two-year recession in the country.

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Venezuela’s opposition plans to treat equally creditors ensnared in the country’s $150bn web of defaulted debt if President Nicolás Maduro is removed — after weeding out inflated, fraudulent, or corrupt claims, the Financial Times reported. In a new policy paper, advisers to US-backed opposition leader Juan Guaidó sketch out how his administration would go about restructuring Venezuela’s huge and varied stock of debt, which includes unpaid supplier invoices, expropriation claims and defaulted bonds, among other instruments.

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Brazil’s state-controlled bank Caixa Economica Federal SA is challenging a decision by corruption-ensnared conglomerate Odebrecht SA to include one of its units’ foreign bondholders in its bankruptcy protection filing, according to a document filed in the court case, Reuters reported. Among the 21 Odebrecht affiliates that filed for the bankruptcy proceeding two weeks ago was Odebrecht Finance, the issuer of $3 billion in bonds guaranteed by the group’s construction unit OEC.

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Brazilian bank Itaú Unibanco Holding SA is questioning a decision by the judge in charge of Odebrecht bankruptcy related to a stake owned by the conglomerate in petrochemical producer Braskem SA, Brazilian newspaper Valor Economico reported on Tuesday. Itaú has not formally challenged the judge decision, but just asked the judge to reconsider it, Valor said, citing people with knowledge of the matter, Reuters reported. Odebrecht and Itau did not immediately reply to requests for comment. The case is under seal and not publicly available.

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