Venezuelan bond prices jump on report state oil giant will avoid default

Employees of Petroleos de Venezuela SA (PDVSA) wave flags during a swearing in ceremony for the brand new board of directors of Venezuela's state oil company in Caracas, Venezuela, on Tuesday, Jan. 31, 2017.

Carlos Becerra | Bloomberg | Getty Images

Employees of Petroleos de Venezuela SA (PDVSA) wave flags during a swearing in ceremony for the brand new board of directors of Venezuela’s state oil company in Caracas, Venezuela, on Tuesday, Jan. 31, 2017.

The cost of Venezuelan bonds rose across the board Tuesday on a report which the nation’s state oil giant has made not bad on two missed interest payments along with also had approved funds ahead of a critical debt deadline.

PDVSA has not made an announcement about the payments or the approval, nevertheless if confirmed, the idea might alleviate an immediate threat to the viability of embattled President Nicolas Maduro’s regime. Venezuela is usually inside middle of a full-blown economic crisis along with also has suffered severe food shortages, violent street clashes along with also runaway inflation.

Macroeconomic research firm Ecoanalitica on Tuesday reported on Twitter which Petroleos de Venezuela SA had disbursed nearly $122 million in overdue interest payments. PDVSA, as the company is usually known, has also cleared a $984 million principal along with also interest payment on a note — the first of two make-or-break debt payments coming due within the next two weeks.

The first critical payment, due on Friday, is usually on a note which is usually secured by PDVSA’s Houston-based refining firm Citgo. PDVSA stood to lose control of 50.1 percent of the company if the idea defaulted.

Following Ecoanalitica’s tweets, the note rallied to nearly 85 cents on the dollar along with also was yielding 21.6 percent to maturity. On Monday, the idea was trading at 81 cents on the dollar which has a 26 percent yield to maturity. The yield on the note tightened about 400 basis points. Bond yields fall as prices rise.

“The fact which they’re paying which literally has caused the market to bounce a couple of points,” said Russ Dallen, managing partner at Caracas Capital Markets, which runs the Venezuela Opportunity Fund. “There was no word coming from the government, no payment, so the idea was just looking like they were just going to default.”

PDVSA’s next major debt market obstacle comes Nov. 2, when the idea must pay $1.2 billion on a bond which is usually maturing.

The company’s ability to scrape together enough money before Friday makes the idea likely which PDVSA will avoid default on the next big payment, according to Raymond Zucaro, chief investment officer at RVX Asset Management.

Venezuela appears to have shored up its cash pile by delaying debt service on interest which includes a 30-day grace period, he said. Venezuela had missed $586 million in payments tied to the debt of the government, PDVSA along with also the utility Electricidad de Caracas This kind of month.

The country also recovered at least $400 million in collateral by allowing a gold swap with Deutsche Bank to expire, Redd Intelligence, a firm which analyzes emerging markets, reported on Monday. which, combined with the delayed interest payments, might be how PDVSA cobbled together the payment due Friday, Zucaro speculated.

“Classic Venezuelan white-knuckler, right up to the edge,” he said.

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