Venezuela's Bond-Payment Delays Trigger 'Credit Event'

Venezuela's Bond-Payment Delays Trigger 'Credit Event'

For PDVSA, the net value is around $250 million.

Stichting Administratiekantoor Inversiones Petroleras Iberoamericanas will have a 40 percent participation in the project, the official government gazette said, without giving any financial details of the deal.

Venezuelan bond prices have been on a roller-coaster over the past 10 days, as President Nicolas Maduro called investors to debt restructuring talks, while pledging to keep honoring the country's obligations.

Venezuela signed a debt restructuring deal with major creditor Russian Federation on Wednesday, as ratings agencies declared Caracas in partial default.

Venezuelan President Nicolas Maduro's government has struggled to pull the country out of an economic downturn following the collapse of oil prices, while USA sanctions have made it harder for the country to operate in global credit markets.

Delays in payments on Venezuela's sovereign debt and bonds issued by state oil company PDVSA constitute a "credit event", triggering payouts on credit default swaps (CDS), a New York-based derivatives group ruled on Thursday.

"We would very likely consider any Venezuelan restructuring to be a distressed debt exchange and equivalent to default given the highly constrained external liquidity", S&P said.

The Venezuelan government condemned S&P Global Ratings' Tuesday "attack" over its decision to partially place in default Venezuela's debt load after the country missed interest payments for global bonds due in 2019 and 2024, within the 30-calendar-day grace period. Caracas has only $9.7 billion (€8.2 billion) in foreign reserves and needs to pay back at least $1.47 billion in interest on various bonds by the end of the year, and another $8 billion in 2018.

Ratings on those bonds also will be lowered to "D", of default, if not paid on time, it said. Investors buy CDS as a hedge or insurance on that debt.

The sanctions from Washington, which has labeled the Maduro regime a dictatorship, are particularly problematic since they prohibit United States individuals and banks from buying new Venezuelan bonds, a requirement for any debt resolution.

A default can be declared by the major ratings agencies, big debtholders or the government itself.

"The economic policy has been the same for many, many years now", he said.

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