CARACAS: Venezuela’s state oil company hasn’t paid bondholders a dime in the last five years. Yet, investors who’ve held on to one particular security are getting ready for a massive payoff.
The Petroleos de Venezuela SA (PDVSA) bond that matured in 2020 has emerged as the lone bright spot in the US$60bil pile of defaulted Venezuelan government and oil bonds.
It trades for 93 US cents on the US dollar, with some analysts arguing it has room to gain, while all the others are quoted for less than 17 US cents.
The price reflects more than just market optimism.
The bonds are set to be paid off after an Elliott Investment Management affiliate late last month won the bidding process for one of PDVSA’s subsidiaries for US$7.3bil.
That will make Elliott responsible for satisfying the bondholder claims because the collateral on the notes is shares in an affiliated company – the parent of Citgo Petroleum Corp.
It represents a rare victory for investors who have otherwise seen their holdings in Venezuela debt pummelling by years of economic collapse, political isolation and the downfall of an oil industry that provides the vast bulk of the nation’s dollar earnings.
Any hopes of a full-scale debt restructuring were dimmed in July when President Nicolas Maduro made the dubious claim he won the presidential election, further isolating his government.
Some investors scooped up the PDVSA 2020 bonds at a huge discount. Two years ago, they were trading for less than 20 US cents on the dollar.
“We are glad that there is finally a deal” for Citgo, said Lee Robinson, chief investment officer of Altana Wealth, who launched a fund to load up Venezuelan debt about four years ago.
“It means the money is there for the bondholders.”
Just how much they will get paid now rests squarely with Elliott, a New York-based activist investor that was founded by billionaire Paul E Singer.
In Latin America, Elliott is perhaps best known as a creditor that dragged Argentina to court to win a multibillion dollar payout, going as far as to seize an Argentine naval ship along the way. — Bloomberg
