March 5, 2020 / 5:19 PM / in a month

London-based fund offers to buy Venezuela bonds at heavy discounts

CARACAS, March 5 (Reuters) - A London-based fund is offering to buy Venezuelan bonds at heavy discounts, as the government remains in default and U.S. sanctions block some investors from trading the debt, according to three sources and a document seen by Reuters.

The fund, MCAHoldCo Ltd, has hired a German bank to manage its offer to buy bonds issued by Venezuela’s government and its state oil company, Petroleos de Venezuela, said the sources, who spoke on the condition of anonymity.

An MCAHoldCo representative, reached for comment by telephone on Thursday, declined to comment.

President Nicolas Maduro’s government began falling behind on its debt in 2017 after collapsing oil prices left the once-prosperous OPEC nation in an economic tailspin.

The government and PDVSA are now in default on all of their foreign bonds and currently owe Wall Street investors nearly $20 billion in unpaid interest and principal.

U.S. sanctions - designed to oust Maduro, whom Washington calls a corrupt dictator usurping power after rigging a 2018 election - block any U.S. financial institution from dealing with PDVSA. They also block U.S. investors from trading the bonds, which has led to a sharp fall in their prices.

The fund is offering to buy PDVSA bonds at 6.5 cents on the dollar and government bonds at 10.5 cents on the dollar, according to the document.

Most PDVSA bonds are trading at 9.86 cents on the dollar, while most Venezuela government bonds are trading at 15 cents on the dollar, according to Refinitiv Eikon data.

“The offer they are making is well below the market,” one of the sources said.

The offer to buy the bonds expires on March 16, one of the sources said.

A second source said that MCAHoldCo had previously made similar offers. The fund’s website contains information about a tender offer for Venezuela and PDVSA debt due last November.

Many of the largest holders of Venezuelan bonds have formed a committee, but they have not begun restructuring talks with Maduro’s government due to the U.S. sanctions. (Reporting by Corina Pons in Caracas; Additional reporting and writing by Luc Cohen; Editing by Dan Grebler)

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