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PdV eludes default, clashes escalate

12 Apr 2017, 7.08 pm GMT

PdV eludes default, clashes escalate

Caracas, 12 April (Argus) — Venezuelan state-owned oil company PdV paid $2.23bn in bond principal and interest due today, beating back a threatened default apparently by tapping its own cash reserves to cover the entire payment.

Three holders of the maturing PdV 2017 bond with a 5.25pc coupon tell Argus that PdV's payments arrived in their respective accounts on schedule today.

The company assured bondholders last week that it would not default on over $2.47bn of scheduled payments in April, including today's $2.23bn bond maturity. But onlookers have been skeptical in light of its falling crude production and exports.

The central bank's international reserves are reported today at $10.6bn, an indicator that PdV did not tap the bank for funds to cover its debt.

The central bank last week borrowed $300mn at 8pc annual interest from New York-based Fintech Advisory Group in a bond repurchase deal, or repo, in which $1.3bn of PdV bonds held by the bank were mortgaged for $300mn in cash, for an effective discount rate of about 68pc.

The repo with Fintech boosted the bank's current reserves position to over $10.6bn from over $10.3bn a week ago.

It also appears that PdV paid today's bond maturity in full without securing fresh financial assistance from third parties.

Last year the company pledged 50pc of its US downstream subsidiary Citgo as collateral for a debt restructuring. A few months later, the other half was quietly deployed as collateral to obtain a $1.5bn credit from Russia's state-controlled Rosneft.

Last month PdV offered Rosneft a 10pc stake in its 120,000 b/d Petropiar integrated heavy crude project. But the company's existing minority partner, US major Chevron, has a right of first refusal for the stake. There is no indication that any part of that transaction has been executed.

PdV is also considering granting Rosneft and other foreign oil companies rights to unexploited oil reserves in exchange for new financing, a presidential palace official told Argus last month.

PdV has another roughly $700mn of bond debt due in May. The next big test of the company's solvency is in the fourth quarter, when $3.43bn in bond principal and interest comes due for payment in the last week of October and first week of November 2017.

Venezuela has fended off default on several occasions in recent years as oil revenue dwindles. If oil prices remain in a $50/bl range during the rest of 2017 PdV may be compelled later this year to seek a liability management operation that could include another voluntary debt restructuring, or a forced restructuring if creditors balk, a senior economy and finance ministry official said.

The financial maneuverings coincide with increasing unrest in Caracas and other Venezuelan cities, sparked by the government-controlled supreme court's 29 March ruling that effectively dissolved the opposition-controlled legislature and granted unpopular president Nicolas Maduro unlimited executive powers to create oil and joint ventures and secure new loans.

The high court's rulings triggered widespread international condemnation, forcing the government to orchestrate a partial revision. But the legislature remains effectively neutered, and opposition leaders are stepping up demands for general elections.

Recent clashes between opposition protestors and security forces have led to five deaths and hundreds of injured and detained. Opposition leaders are calling for more protests tomorrow.

Unlike previous flare-ups, the latest demonstrations have taken on daily momentum, even during the normally quiet days heading into Easter Sunday. Security forces and armed gangs that support the regime are deploying increasingly repressive tactics.

In a notable incident yesterday, Maduro was pelted with rocks and other objects while his motorcade snaked through a crowd in San Felix, Bolivar state. A live national broadcast was abruptly cut off.

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