Bondholders press case for Venezuela debt resolution

A group of bondholders carrying mostly delinquent Venezuelan debt is reiterating its case for international measures that would facilitate some form of debt restructuring.

Citing a 19 November US newspaper report that Washington may designate Venezuela as a state sponsor of terrorism, the New York-based Venezuela Creditors Committee said it "supports the continued evaluation by the US government of any and all initiatives that would have the effect of accelerating a peaceful resolution to Venezuela's ongoing political and economic crisis."

The group added that it "remains supportive of any measures that may ultimately facilitate a consensual negotiation between the government of Venezuela and all of its external creditors, which will be a critical component to the country's recovery and re-entry into global financial markets."

The Venezuelan government and state-owned oil company PdV have an estimated $190bn in external debt, including more than $60bn in bond debt. All of the bonds are in default except for a PdV 2020 issuance that is secured by 50.1pc of the shares in PdV Holding, the indirect parent company of PdV's US refining subsidiary Citgo.

Treasury and State Department officials declined to comment on the possible designation.

The Venezuelan government and PdV are already subject to US financial sanctions since August 2017, hampering their access to financing.

The bondholders' committee, which includes institutional investors holding around $8bn in bonds issued by the government of Venezuela, PdV and utility Electricidad de Caracas, was formed in April 2018 "to facilitate communication and coordinate actions among bondholders and other stakeholders, and to consider financing alternatives for Venezuela under an appropriate political and economic policy scenario."

Former and current US administration officials said Washington has not directly targeted Venezuela oil exports for fear of triggering an immediate economic collapse. Argus estimates crude oil production fell by 37pc year over year to 1.17mn b/d in October, and that slide continues.

The US remains an important destination for Venezuelan exports, and its primary source of cash revenue. The US imported 491,000 b/d of crude from Venezuela in the 12 months ended August, a 30pc decline over the preceding 12-month period, Energy Information Administration data show.

A formal designation as a "state sponsor of terrorism" would not by itself preclude oil trade between the US and Venezuela, lawyer Doug Jacobson said. But it would affect payments for such trade, he said, because US and international banks are wary of engaging in transactions with countries carrying that US designation.

Representative Eliot Engel (D-New York), who is expected to take over as House Foreign Affairs Committee chairman in January when his party takes control of that chamber of Congress, said he warned the administration against the designation unless it can prove that Caracas has ‘repeatedly provided support for acts of international terrorism,' a legal requirement. "Thus far, I have seen no evidence of this," Engel said.

President Donald Trump and his administration officials have accused Caracas of giving backing to agents of Lebanon-based group Hezbollah, as well as funding the groups that direct central American migrants to the US-Mexico border. But the administration also portrays Caracas as a pawn of Cuba's military and security advisers — and Havana is not on that designation list.