Editorial / Commentary / Opinion
VenEconomy : And they still haven’t learned!
PDVSA doesn’t want to learn or isn’t interested. At least that’s what its decision to launch another issue of petro bonds on the market indicates.
In July 2009, PDVSA made a bond issue that it found very difficult to place. To do so, it first had to make four amendments to the offer, and even so, it did not manage to place the issue. Only after the closure of the issue and by dint of applying pressure did it manage to get the Venezuelan banks to take it.
Now PDVSA has announced a new bond issue where it is repeating many of the mistakes it made in the recent past.
The new issue consists of three petro bonds: two maturing in 2014 and 2015 with a placement value of $1.3 billion and one that will mature in 2016 for $400,000,000, with the minimum investment set at $3,000 per unit. The petro-bond trio will be issued in dollars and be payable in bolivars at 138% of its face value and at an interest rate of 4.9%, 5%, and 5.125%, respectively.
This time, the “self-sufficient” PDVSA is launching this new issue without consulting experts at banks such as Citibank and Deutsche Bank, which could result in it making beginner’s mistakes that would make the issue impossible to sell.
For starters, all the international issues of any country are subject to the laws of New York or other international jurisdictions. But the Bolivarian PDVSA has made this issue subject to the laws of Venezuela.
Moreover, it establishes that the interest will be taxable at 5% for foreign investors and at 34% for Venezuelans.
It is worth remembering that PDVSA has not published a financial report for the first quarter of the year, much less for the second.
Besides, account should be taken of the fact that this issue brings the bonds Venezuela has offered in the space of four months to $11 billion, an amount that clearly exceeds the Venezuelan debt absorption capacity of foreign markets.
And to top it all, the price set by PDVSA (138%) is too high. Analysts estimate that the new issue will trade on international markets at 55% of its face value or less. Assuming a price of 55%, the buyer who sells his bonds would end up getting dollars at Bs.F.5.39:$, which is more that the present swap dollar.
All this leads one to think that this issue has been born with a congenital defect that will condemn it to failure. Now come the moves, countermoves, and tussles in order to, eventually, manage to place the issue –only just- at a price that
will be between 100% and 110% (i.e. between Bs.F.3.90:$ and Bs.F4.30:$).
What is certain is that, with this new issue, the Hugo Chávez administration will deal yet another blow to Venezuela’s credit capacity.
VenEconomy has been a Venezuela's leading specialized publisher on financial, political and economic data since 1982. VenEconomy's Points of View on the issues of the day, as seen by VenEconomy during the last week. Petroleumworld does not necessarily share these views.
Editor's Note: This commentary was originally published by VeneEconomy on 10/20/2009. Petroleumworld reprint this article in the interest of our readers .
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Petroleumworld News 10/21/09
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