| NEW YORK/LONDON, April 4
NEW YORK/LONDON, April 4 Venezuela will likely
stay current on its debt and make about $3 billion in payments
next week, according to some investors and bondholders, voicing
guarded optimism even amid worsening turmoil for the country.
Venezuela bond bulls have come under pressure since the
country's Supreme Court stripped all powers from its Congress in
a ruling last week, a power grab that drew widespread
condemnation and sent its traded debt to nine-month lows, even
sinking after the court reversed the move.
So far, betting on Venezuelan bonds has tended to pay off
for investors able to separate the government's steady ability
to honor payment deadlines from widespread concern about its
stability and economic stewardship.
"We still have a buy recommendation on the PDVSA April
maturity and the longer sovereign bonds and PDVSA bonds, but we
have to revisit that every day as the news comes out," said
Stuart Culverhouse, head of research at Exotix Partners, a
London-based investment firm for frontier and illiquid markets.
Optimism about Petroleos de Venezuela SA, better known as
PDVSA, coming up with the $2.55 billion in cash it owes on April
12 is not universal. Venezuela also needs to pay $437 million in
interest due on its sovereign bonds.
Credit default swaps, which investors buy as insurance
against a bond defaulting, widened to 61.5 percent on Monday,
indicating the highest risk level on the PDVSA bonds since
In recent days, PDVSA has realized it needs help from its
Russian counterpart to be able to meet its hefty April payments,
sources told Reuters on Friday.
Also adding to investors' concern is the paucity of economic
and other data coming out of the OPEC nation, which has the
world's biggest crude oil reserves.
"Venezuela hasn’t published growth numbers since the third
quarter of 2015 print – we’re driving blind here," said Alejo
Czerwonko, an emerging market strategist at UBS Wealth
The price on Venezuela's benchmark $4 billion bond maturing
in September 2027 with a 9.25 percent coupon slid during last
week's political crisis and fell further this week.
The bond's yield, which moves in the opposite direction of
price, has risen to nearly 24 percent, the highest since June
Still, the bonds' lofty interest rates and Venezuela's
record of consistent debt payments, even in the face of
crippling food shortages, lackluster oil prices and mass public
unrest have kept investors coming back for more.
"It's a country that does offer very solid returns and has
the potential to be a much higher rated country in the future,"
said Shamaila Khan, director of emerging markets fixed income at
AllianceBernstein in New York, who recently returned from a trip
to the country.
Khan declined to say whether AllianceBernstein was planning
to make any changes to its holdings of Venezuelan debt.
Confidence in Venezuela meeting its debt obligations was
driven, at least in part, by the reliance of President Nicolas
Maduro on capital markets to keep his government in power, UBS's
“What is bad for the country is not that bad for the
bondholders – the current regime is committed to servicing the
external debt of Venezuela and PDVSA," said Shahzad Hasan,
portfolio manager emerging markets fixed income at Allianz
“If anything I was more worried about default in the
previous two years than I am this year," he said.
(Reporting by Dion Rabouin; Editing by Christian Plumb and Tom