Venezuela

Venezuela will fulfill its sovereign-bond obligations even though U.S. sanctions are affecting its ability to conduct normal debt relations, said President Nicolas Maduro. Maduro spoke at the Russian Energy Week conference in Moscow on Wednesday as his nation’s struggling economy becomes increasingly reliant on the Kremlin’s support, Bloomberg News reported. The Latin American oil producer is struggling to meet its financial obligations and remains on course for a fourth consecutive year of economic contraction in 2017, according to Fitch Ratings.

Venezuelan investors are getting ready for a wild ride over the next five weeks as the government stares down $3.5 billion in debt payments, Bloomberg News reported. While all the country’s due dates in the past year have elicited serious hand-wringing, the next few are on a whole new level. That’s because unlike recent transactions in which a 30-day grace period allowed Venezuela to avoid default, the upcoming deadlines have no leniency. Further complicating matters, some of the bonds are backed by a majority stake in Citgo Holding Inc., potentially putting one of the biggest U.S.

Venezuela has a dubious backstory when it comes to paying sovereign debt. It’s tied with Ecuador for the most defaults since 1800, Bloomberg News reported. But for anyone betting that a default would catapult President Nicolas Maduro from office even as he holds on in the face of untold economic misery, here’s a more relevant marker: Not once on those 10 occasions, most recently in 2004, did a missed payment spur a change in government. In fact, defaults around the globe have triggered governmental change less than 15 percent of the time since 1992, according to data compiled by Bloomberg.

Venezuela, one of the world’s riskiest countries for investors, is late on a debt payment, Bloomberg News reported. The intermediaries tasked with passing along interest payments for the cash-strapped nation haven’t received the funds for an $185 million coupon that was due Sept. 15, according to people with knowledge of the matter. Investors interviewed by Bloomberg say they haven’t been paid, and brokers say their clients are still waiting on the cash. The government has a 30-day grace period -- now 25 days -- to make good on the payment before triggering an event of default on the notes.

One of the largest holders of Venezuelan bonds says U.S. sanctions are giving Nicolas Maduro’s government greater incentive to pay its debts. The penalties imposed late last month restrict the country’s ability to restructure its obligations, meaning the president’s only option is to keep scraping up enough cash to keep current on overseas notes, Bloomberg News reported.

For years, investors in Venezuela and its state oil company, Petroleos de Venezuela SA, took comfort knowing that in the event of a default, there’d be assets they could potentially seize to recoup some of their losses, Bloomberg News reported. But for bond buyers with an even bigger appetite for risk, those willing to throw themselves at the mercy of President Nicolas Maduro’s survival and track record of making good on debt payments, there’s another option: Electricidad de Caracas, the state-run electric utility.

Venezuela has asked Moscow to restructure the country’s debt, Russia’s finance minister has said, in a sign of the country’s deepening financial distress, the Financial Times reported. Russia has become a critical lender to the crisis-wracked country, through state loans and financial assistance by state oil producer Rosneft to Venezuela’s PdVSA. “There was a request from our colleagues in Venezuela to carry out a restructuring,” said Anton Siluanov.

Venezuela’s dollar bonds are testing all time lows as President Nicolas Maduro plots how to respond to new U.S. sanctions and revive an economy in shambles. The country’s $4 billion of benchmark notes due in 2027 declined 4.6 percent in August to 39.65 cents on the dollar, just 7 cents away from the record low of 32.45 cents on the dollar seen in February 2016, Bloomberg News reported. State oil company PDVSA’s $3 billion of notes due in 2035 declined 5.8 percent in August to 35.3 cents on the dollar, only 6.2 cents above the record low.

U.S. sanctions imposed on Venezuela last week put limits on new debt from the country. But the Treasury Department’s move is having broader consequences in the bond market, where brokers taking a cautious stance are limiting trades in existing notes. Depository Trust Company, a custodian for more than $35 trillion of securities, temporarily put a block on services for Venezuelan bond trades, and some dealers have also stopped buying and selling the debt.

The world’s riskiest credit continued its downward spiral after Fitch Ratings lowered Venezuela’s grade deeper into junk, saying additional U.S. sanctions increase the probability of non-payment. Fitch reduced the nation’s long-term foreign and local currency ratings to CC, just two notches from default, from CCC on Wednesday, Bloomberg News reported. S&P Global Ratings and Moody’s Investors Service also rank the country at speculative levels.