Venezuela debt talks leave creditors hanging

A Venezuelan government meeting with some bondholders yesterday in Caracas ended chaotically in under 30 minutes following a vitriolic speech by US sanctioned vice president Tareck El Aissami, who gave no indication of a plan to restructure about $70bn in sovereign and state-owned PdV bond debt, multiple people who attended the talks or are close to attendees told Argus.

The US Treasury's Office of Foreign Assets Control (OFAC) "is trying without legal cause to diminish our capacity to have relationships with the world," El Aissami told the audience of about 80 people at the defense ministry´s White Palace.

As a result, "Venezuela today finds itself limited in terms of securing new financing, leaving us with the need to propose new financing formulas to exit this complexity," he said.

Contrary to pre-meeting assurances that Venezuelan nationals subject to US sanctions for drug trafficking or corruption would not be in the room, El Aissami and finance minister and PdV chief financial officer Simon Zerpa turned up, forcing some US citizens to walk out rather than risk breaching US sanctions.

Disgruntled bondholders were given Venezuelan coffee and chocolate as they filed out of the conference room.

The meeting was "a colossal waste of time," an attorney representing several bondholders said. "It appears the meeting was held only to provide El Aissami an opportunity to deliver an unhinged rant against the US."

A second attorney representing European bondholders at the meeting said Venezuelan president Nicolas Maduro's government "clearly doesn't have a plan to prevent a sovereign debt default and has no idea what it's doing."

As expected, the government proffered a contrasting narrative. The Venezuelan vice president's office issued a statement describing the meeting as "highly positive and auspicious."

Venezuela failed to pay about a combined $200mn of interest payments due in October for its 2019 and 2024 sovereign bonds after a 30-day grace period expired. The missed payments prompted S&P Global Ratings to declare Venezuela in selective default. Fitch Ratings declared PdV in restricted default after the firm missed payments due on 2 November and 27 October "due to processing delays that resulted in bondholders receiving principal payments up to one week after the due date."

Two bond traders said their clients as of this morning still had not received their share of a $1.12bn principal payment on the PdV bond that reached final maturity on 2 November.

Venezuela now appears to have accumulated over a combined $2bn of sovereign and PdV debt principal and interest arrears since early October. El Aissami and Zerpa insisted yesterday following the meeting that Venezuela has paid in full, and blamed the delays in disbursing funds on unspecified operational problems involving paying agents.

"We don't know what the Maduro government's end game is after the failed meeting," a bond trader said. "The government is not being communicative and is not providing the information bondholders need to judge whether a default has occurred or if the US sanctions are causing compliance problems for the payment agents."

No follow up meeting was scheduled.