Saturday 28 October 2017

Vene's MTNs bounce

Defaulting on your obligations is not the act of a macho, tough guy, revolutionary after all. Also the oil price is recovering which helps.


So a vague and potentially confused statement from Maduro has sent the 2021s from 50c on Thursday down to 30c or so on Friday.

At the end of the day the debt they have is fine in a functioning economy. The problem is Maduro. Question is what if anything will he agree to? With the US sanctions in place a swap to a reprofiled strip would probably have to be via CNH bonds. Which most US and EU investors wont be able to hold or take part in. Which means default and no restructuring and US investors trying to seise oil exports through courts. PdVSA will also struggle to import light oil for its refineries.

One wonders if below the surface the PdVSA production problems are mounting and it is causing cash flow issues. As before Thursday with a rising oil price it looked like the bet was they would pay and try and coerse an amicable reprofiling next year, hence the bonds in question rallying 10 points in a couple of weeks. Clearly the sanctions have caused problems.

I dont see Maduro leaving voluntarily either he and his cronies are big time narco trafficantes. But equally a hard default is not a very likely option.

In short a positively evolving story has been derailed by this weird announcement.

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