Venezuela, Russia sign $3bn debt restructuring deal

Venezuela and Russia signed a debt restructuring agreement in Moscow today covering $3.15bn of overdue mostly arms-related debt owed by Caracas, the Venezuelan finance ministry said.

Venezuela will repay the $3.15bn over a 10-year period, the ministry said, declining to disclose interest rates, frequency of payments and front-end grace periods if any.

A presidential palace official said the deal "minimizes Venezuela's payments during the first six years of the 10-year restructuring agreement."

A Russian diplomat in Caracas told Argus the deal aims to "free more funds for Venezuela to develop its economy and improve the Opec country's payments capacity, increasing the probability that all creditors will receive the payments they are owed."

In a statement, Russia's finance ministry said the "intergovernmental protocol" restructuring Venezuela's debt was signed under auspices of an 8 December 2011 agreement that granted the state loan to Caracas.

"A new debt repayment schedule provides for payments over 10 years, the volume of which is minimal in the first six years. Debt relief provided to the Republic as a result of debt restructuring will allow the allocation of funds for the development of the country's economy, improve the debtor's solvency, increase the chances of all creditors to return loans granted earlier to Venezuela," the Russian finance ministry said.

The Venezuelan energy ministry said the restructuring deal signed by Simon Zerpa, Venezuela's finance minister and state-owned PdV chief financial officer, does not include any corporate debt that PdV owes state-controlled Russian oil company Rosneft.

PdV is believed to owe Rosneft more than $6bn. Venezuela's energy ministry declined to disclose the Venezuelan oil company's total outstanding debt to Rosneft and other Russian lenders.

Rosneft's vice president Pavel Fyodorov said yesterday that PdV is paying its debt, but the Russian oil company currently has no plans to make new loans or cash pre-payments for future oil supplies from PdV.

Rosneft's Venezuelan assets include interests in heavy crude production and upgrading joint ventures with PdV.

The debt restructuring agreement with the Russian government was signed in the same week that credit rating agencies S&P Global Ratings and Fitch Ratings declared Venezuela and PdV in partial default on late bond payments.

President Nicolas Maduro's government held a meeting with some bondholders and their representatives in Caracas on 13 November to launch formal debt restructuring negotiations covering up to $70bn of outstanding sovereign and PdV bond debt.

Vice president Tareck El Aissami chaired the brief meeting. El Aissami is among numerous Venezuelan officials subject to US Treasury sanctions, in his case for alleged drug trafficking, prompting some US citizens at the meeting to step out. Zerpa is also sanctioned for alleged corruption.

El Aissami did not present a concrete restructuring proposal, and instead read a brief prepared statement blaming the US sanctions for pushing Venezuela to the brink of Latin America's first sovereign default since 2001. No follow-up meeting has been scheduled.