Venezuela

As the political crisis in Venezuela rumbles on, a number of creditors are squaring up in what promises to be one of the most complicated debt restructurings in history, the Financial Times reported. What will make a workout so tricky to resolve is not just the amount of IOUs sitting on the balance sheet of the South American nation, the fourth-largest economy in the region, but the diversity of its creditor base. In recent months, some aggrieved lenders have filed lawsuits against the government and the state-owned oil company, PDVSA, sparking some unease from the rest.

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As if muddling through a humanitarian crisis and a sharpening political stand-off between authoritarian Nicolás Maduro and opposition leader Juan Guaidó weren’t bad enough, Venezuela will soon have to wade through what is said to be one of the messiest debt restructurings in history, the Financial Times reported. What will make Venezuela’s forthcoming debt workout so difficult to resolve is not just the amount of IOUs sitting on its balance sheet, but the diversity of its creditor base. Like most metrics in Venezuela, these exact figures are difficult to come by.

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Distressed-debt investors are deeply divided when it comes to how much bondholders can recover after a Venezuelan restructuring, Bloomberg News reported. Doomsayers argue that a nation suffering Latin America’s worst humanitarian catastrophe has greater concerns than paying investors. Harvard economist Ricardo Hausmann, an informal adviser to U.S.-backed National Assembly leader Juan Guaido, has said creditors must take a big haircut.

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Venezuelan opposition leader Juan Guaido’s team of advisers is rushing to take control of the country’s main foreign asset, U.S. refiner Citgo Petroleum, before a potential bond default that could leave half the company in creditors’ hands, sources close to the talks told Reuters on Monday.

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Venezuelan bond prices jumped to the highest in six months as large anti-government protests throughout the country spurred speculation that President Nicolas Maduro’s regime could be coming closer to an end, Bloomberg News reported. As Venezuelans took to the streets, the country’s $4 billion of defaulted notes due in 2027 surged 2.4 cents to 30.7 cents on the dollar, the highest price since June. Other overseas notes from the government and state-owned oil company joined along in a broad rally.

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On Thursday Nicolás Maduro will be sworn in for a second term as president after his first term saw an exodus of Venezuelans escaping economic meltdown. The UN says more than 3m people have fled Venezuela since 2014, around 10 per cent of the population, while the IMF expects prices will rise a staggering 10m per cent in 2019, the Financial Times reported.

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For the better part of the past year, Venezuela’s debt market has been dead. The bonds are in default and there are no restructuring talks, almost no trading and little action from creditors beyond grumbling in private, Bloomberg News reported. But that appears about to change. In the past few weeks, one group of investors banded together to demand immediate payment on the notes they hold, another cohort hired a law firm to review their options and a separate creditor sued in U.S. federal court.
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A group of creditors has demanded payment on a $1.5 billion Venezuelan bond that is in default, their lawyer said yesterday, kicking off a long-awaited showdown between creditors and the crisis-wracked OPEC nation, Reuters reported. President Nicolas Maduro’s government and state-owned companies owe nearly $8 billion in unpaid interest and principal following this year’s default on bonds amid a hyperinflationary collapse of the country’s once-wealthy socialist economy.
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