Venezuela

Venezuela’s bond market has been rocked over the past few years by defaults, sanctions and a collapse in crude oil prices, Bloomberg News reported. Yet the disastrous cocktail is attracting hedge funds including London’s Altana Wealth Ltd. that say the situation can’t get any worse. Altana is pitching the South American nation’s government notes, which can be bought at pennies on the dollar, as the “trade of the new decade,” according to two letters to investors seen by Bloomberg.

Venezuela is planning to sell some of its shares in the CAF Latin American development bank to pay down its debt with the lender, representatives of the South American country’s opposition said, Reuters reported. The sale was expected to be discussed at a meeting of the CAF’s board on Tuesday, said two opposition lawmakers and a member of a committee named by the opposition to restructure the country’s debt, who warned that the move would jeopardize the crisis-stricken nation’s economic recovery.

After decades of dominating its oil industry, the Venezuelan government is quietly surrendering control to foreign companies in a desperate bid to keep the economy afloat and hold on to power, the International New York Times reported. The opening is a startling reversal for Venezuela, breaking decades of state command over its crude reserves, the world’s biggest. The government’s power and legitimacy have always rested on its ability to control its oil fields — the backbone of the country’s economy — and use their profits for the benefit of its people.

As Venezuela enters its third full year in default, its obligations have become something of an afterthought to even its biggest creditors, Bloomberg News reported. Worth just pennies on the dollar, tens of billions in bonds routinely go days at a time without trading. Sanctions bar U.S. investors from buying them and make the prospect of a full-scale restructuring all but impossible. And with no end in sight to the political stalemate in Caracas, it’s no wonder few creditors have taken the costly step of taking the government to court.

Venezuela’s opposition-run congress said on Tuesday it had set aside $20 million held in accounts in the United States to pay for litigation abroad as part of efforts to protect the country’s offshore assets from lawsuits by creditors, Reuters reported. Offshore assets including U.S. refiner Citgo have long been seen as attractive by investors holding the country’s defaulted bonds and companies seeking to be paid back for the nationalisation of their holdings.

Venezuela’s state-run oil company PDVSA said its financial debt fell less than 0.1% in 2019 from the prior year to some $34.5 billion, though it remained in default on its bonds as sanctions freeze it out of the global banking system, Reuters reported. PDVSA, which is short for Petroleos de Venezuela S.A., has stopped paying interest on most its bonds, and together with Venezuela’s government has accumulated billions of dollars in late interest payments.

Swedish oil refiner Nynas, which is owned by Venezuela’s state-run PDVSA and Finland’s Neste Oil, said on Tuesday it planned to reorganize its business in an attempt to disentangle itself from U.S. sanctions imposed on Venezuela, Reuters reported. Nynas said the proposed changes to its ownership structure, backed by both PDVSA and Neste Oil, were filed with the United States’ Office of Foreign Assets Control (OFAC) on January 17.

We are a long way from the end-game in Venezuela’s debt resolution. In a recent twist, the United States Office of Foreign Asset Control precluded, for 90 days, the enforcement of a bond owed by the Venezuela oil company PDVSA, the Financial Times reported in a commentary. Payment of the bond is secured against PDVSA’s shares in its US subsidiary, the energy giant CITGO. The policy notion was to approximate the effective standstill faced by other bondholders whose legal and financial positions have been affected by US sanctions.

The team advising Venezuelan National Assembly President Juan Guaido skipped a payment Monday on the nation’s only bonds not in default, setting up a legal showdown with creditors, Bloomberg News reported. Rather than pay the $913 million due on Petroleos de Venezuela’s 2020 notes, Guaido’s advisers say they will take legal action against investors to fight any efforts to seize the collateral on the bonds -- 50.1% of Citgo Holding Inc.’s shares. Their argument is that the debt is illegal because the opposition-led National Assembly never approved its issuance.

Ashmore Group Plc and Venezuela’s government may be headed for a legal battle as a potential default on the state oil company’s 2020 bonds sets off a rush to lay claim to the nation’s most prized asset abroad, Bloomberg News reported. Ashmore, which owned about half the securities as of June 30, has urged Petroleos de Venezuela to make the $913 million payment on its 2020 notes due Oct. 28, yet the team advising National Assembly President Juan Guaido claims it doesn’t have the funds, three people familiar with the matter said.