Venezuela: Pdvsa intends to issue more bonds by the end of the year

[ChangoLoa]

I remember one of the worshipers talking about how conservative Chavez's financial policies were... another nonsense!

November 2

Pdvsa ponders on issue of dollar-denominated bonds by the end of the year
In a report forwarded to its clients at the end of October, investment bank Barclays Capital, following a meeting with Venezuelan authorities, reported that state-run oil holding Petróleos de Venezuela (Pdvsa) and the Venezuelan Guayana Corporation (CVG) have plans to issue bonds in US dollars by the end of 2009.

The issue would stand at USD 3-5 billion.

If a deal is made for USD 3 billion, Venezuela's total debt, including the debt in Venezuelan bolivars, at the official exchange rate, will heighten 51 percent in 2009, from USD 64.7 billion to USD 97.7 billion.

While in terms of the size of the economy the Venezuelan debt is not statistically significant, it should be noted that because of the fixed exchange rate, the Gross Domestic Product (GDP) estimated in US dollars turns out to be artificially high.

According to Barclays' calculation, taking into account the parallel exchange rate, the domestic total debt will increase from 27.6 percent of the GDP in 2008 up to 39.2 percent this current year.

In 2010, the investment bank, in view of the budget passed by the National Assembly, estimates that the government will place the equivalent to USD 10 billion in local currency-denominated bonds and dollar-denominated titles for USD 12 billion.

In this way, ending 2010, the domestic debt would be, in the aggregate, as high as USD 113.7 billion.


November 3

Petrobonds plummet and parallel dollar rebounds
The bonds the state-run oil company Petróleos de Venezuela (Pdvsa) sold last week have been given a frosty welcome by investors, who are skeptical about what they term oversupply of Venezuelan titles and the obligation to settle any dispute in Venezuelan courts.

As a result, the bonds due in 2014 are traded at 57 percent of their value, while the bonds expiring in 2015 are quoted at 53.75 percent and the 2016 bonds are quoted at 50.75 percent. These levels have boosted the US dollar price in the swap market.

Venezuelan companies and banks buy dollar-denominated Pdvsa bonds in Venezuelan bolivars and resell them abroad to obtain dollars that are ultimately sold in the parallel market.

As they receive fewer dollars for the bonds, they sell them at higher prices in the unofficial market (it is forbidden under the law to disclose the unofficial US dollar exchange rate).

Risk perception results in higher yield. Pdvsa bonds due 2014 currently yield 18.5 percent while the bonds issued by the Brazilian oil company Petrobras have a 4.40 percent yield.

Analysts consider that the Venezuelan government has flooded the market. In the last month, the Ministry of Finance and Pdvsa have issued dollar-denominated bonds amounting to USD 8 billion, which is the highest amount issued in the emerging countries.

Traders say that there are few buyers of Venezuelan bonds in the market. Therefore, supply exceeds demand, thus forcing down the price of Venezuelan papers.


November 5

Pdvsa announces new bond issue by the end of the year
Rafael Ramírez, the CEO of the state-run oil company Petróleos de Venezuela (Pdvsa), is determined to pay off the debt the company has with providers. Therefore, he announced a new Pdvsa's bonds issue by the end of the year.

"The new transaction is being coordinated by the Ministry of Finance. Pdvsa will sell the bonds by the end of the year," Ramírez told reporters after a press conference at Miraflores Presidential Palace, Reuters reported.

Bonds maturing in 2014 have traded at 56 percent of their value. On the other hand, brokers have said that the bonds have been issued according to Venezuelan law. Therefore, any dispute must be settled in Venezuelan courts. This has been viewed skeptically by investors.

Another factor to be considered is that Pdvsa and the Ministry of Finance have issued a total of USD 8 billion bonds in the last four weeks. Analysts consider that there is an oversupply of Venezuelan bonds in the market.

Given the decline in the value of papers, investors have stopped selling them. As a result, the supply of foreign exchange has fallen.

Therefore, the US dollar, under pressure by high demand and low supply, has climbed during the last five days in the swap market.

Link
http://english.eluniversal.com/2009/11/06/en_ing_esp_pdvsa-intends-to-iss_06A3014413.shtml

[Braulio]

1. The current trend isn't sustainable

Although the debt ratio isn't that bad, the trend isn't that good, they have to reverse the production decline and encourage private industry to invest, but there's nothing solid on the legal front to show they're willing to change their paradigms.