By Alexandra Ulmer
MARGARITA ISLAND, Venezuela, Sept 18 Venezuela's
state oil company PDVSA said on Sunday it would honor all 2017
bonds if a swap offer is not taken up, while reiterating that
its proposal to swap up to $7.1 billion of debt was
Caracas-based PDVSA on Friday made an offer to
swap debt maturing next year for a new 2020 bond with a coupon
of 8.5 percent in an effort to ease its heavy short-term payment
"This offer has very attractive returns," said PDVSA
President Eulogio Del Pino during a summit of the Non-Aligned
Movement on the Caribbean island of Margarita.
"The bond is paid in four years with four successive
amortizations as of 2017. In addition, it is guaranteed by CITGO
Holding Inc., giving confidence to those who decide to do the
swap," he said in a statement, adding that PDVSA was prepared to
meet its obligations regardless of the swap's success.
Markets have not yet had a chance to react to the proposal's
fine print, but appetite may be muted.
The 2020 coupon of 8.5 percent would be identical to that of
the November 2017 bond, although higher than the April 2017
bond's 5.25 percent coupon. There are also some legal worries
the opposition-led National Assembly might oppose the deal
because of its collateral.
"We're going to analyze it," said opposition lawmaker and
economist Jose Guerra. "But we're not going to accept that (use
of Citgo Holding)."
After long fretting about possible default, investors in
recent months have grown more optimistic the OPEC member country
will meet debt payments despite an economic crisis that has
spawned triple-digit inflation and chronic product shortages.
President Nicolas Maduro has noted that the ruling
Socialists, in power since Hugo Chavez's government from 1999,
have never missed a bond payment and calls default rumors part
of a U.S.-backed smear campaign to weaken his government.
In a prospectus on its web site, PDVSA said the 20 weekdays
of the offer would expire on Oct. 14, though the company
reserved the right to extend that.
Results would be given on Oct. 17, with the bonds issued on
Oct. 19, according to the preliminary timetable. Offers must be
over $150,000. The agent in charge of the swap is D.F. King & Co
and the fiduciary Union Bank, the prospectus added.
PDVSA said its total debt up to June 30, 2016, stood at
(Reporting by Alexandra Ulmer; Editing by James Dalgleish)