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PdV investor call backfires: participants

19 Oct 2016 22:18 (+01:00 GMT)
PdV investor call backfires: participants

Caracas, 19 October (Argus) — Venezuelan energy minister Eulogio Del Pino's hastily organized conference call with investors yesterday to discuss the status of state-owned PdV's bond swap proposal appears to have backfired.

Five financial executives who were on the 11am call, which was organized by Deutsche Bank, said the initiative confirmed a broad lack of confidence in the oil company's ability to meet its near-term obligations.

Del Pino, who is also PdV chief executive, was not on the call, apparently because of a last-minute urgent meeting with President Nicolas Maduro. Del Pino's chief of staff Rafael Rodriguez gave a presentation in his place, reiterating a warning that the company will default if the swap offer is not implemented.

PdV is seeking to persuade a minimum threshold of bondholders to exchange two 2017 bonds for one new 2020 bond, because the firm does not have enough cash to meet approaching payment obligations.

"PdV's carrot, sweetening the swap terms by offering 1.2 PdV 2020 bonds in exchange for 1 PdV 2017 bond didn't work, so the carrot approach was abandoned in favor of the stick," one participant said. "But PdV's stick approach as presented by Rodriguez, who explicitly warned that default may be the only option left if the bond swap is called off for lack of interest, inflicted more damage on a transaction that's been poorly managed by Del Pino and the government since it was launched on 16 September."

PdV is seeking to exchange two PdV 2017 bonds with a combined $7.1bn of outstanding principal as of 16 September for a new PdV 2020 bond with an 8.5pc coupon, and backed by 50.1pc of the equity in Citgo Holding, a Delaware corporation that owns Citgo's refineries and some pipeline assets in the US.

PdV has three times extended the original 6 October deadline for signing up for the bond swap, first to 12 October, then 17 October and currently 21 October.

Another extension is possible as PdV struggles to entice PdV 2017 bondholders to commit to exchanging up to 50pc of the aggregate value of the maturing bonds, or $3.55bn, three people who listened in on yesterday's conference call agreed.

PdV's offering prospectus stipulates that it can cancel the bond swap if the 50pc participation threshold is not reached.

Rodriguez conceded in yesterday's call that the current participation rate remains "substantially" below 50pc, but declined to give a number.

Argus tried to reach Rodriguez at his office in Caracas, but his secretary said he is traveling.

Two Caracas-based traders put the swap offer's participation as of yesterday at up to 40pc.

Rodriguez revealed that Venezuelan government entities currently hold "substantially fewer PdV 2017 bonds than the energy ministry and the company believed was the case," a trader who was on the call said.

The government said at the start of 2016 that Venezuelan state-owned entities held over 20pc of PdV's total bond debt of over $36bn. But Rodriguez said yesterday that the total PdV bond holdings of other state entities have changed over the course of this year.

Rodriguez also clarified during the call that Del Pino did not pledge that PdV would pay in full all PdV 2017 bondholders that decline to swap out to the PdV 2020 bond.

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