NEW YORK, Sept 13 (IFR) - Short-term bonds issued by
Venezuela's PDVSA were trading up on Tuesday after the company's
president confirmed that a swap of outstanding 2017s for new
2020s was in the works.
PDVSA's old and new 2017s were up a good 2.5-3 points on the
day to trade respectively at 73-74 and 79.50-80.50, according to
a buyside trader.
If successful the transaction would provide some breathing
space to the state-owned company, which faces billions of
dollars in bond maturities over the next year or so.
Reuters reported that the operation would include US$3bn of
PDVSA bonds maturing in April 2017, and new PDVSA 2017s which
have a US$2bn amortization in November and another US$2bn at the
end of next year.
With no details released on the pricing of the swap,
however, it remains unclear whether a sufficient number of
foreign holders will freely participate in the transaction.
PDVSA is considering collateralizing the bond with shares
from its US unit Citgo, Reuters reported on Tuesday.
But market participants questioned the effectiveness of the
collateral as incentive given that equity pledges have been
placed on a prior financing package from Citgo.
"One has to question the nature of the collateral and where
it has been pledged," said the buyside trader. "With another
US$7bn of debt (collateralized with equity) there would
obviously be material dilution. At this point, it hard to
quantify the extent of participation from external bondholders."
Ultimately, foreign participation is expected to come down
to whether the transaction is net present value positive for
"I don't think anyone cares about the Citgo shares," said
one investor. "I would price this as a normal bond, looking at
the exchange ratio and whether it is NPV positive."
In televised comments, PDVSA President Eulogio Del Pino said
the new bond had received positive evaluations by three rating
agencies, Reuters reported.
(Reporting By Paul Kilby, Davide Scigliuzzo; editing by Shankar