PDVSA unbelievable borrowing!
PDVSA has announced the launch of a new issue for US$3 billion intended for Venezuelan investors and savers and payable in bolivars at Bs.F.4.40:US$.
The issue will have three consecutive annual maturities of US$1billion on each of the three dates -February 17, 2020; February 17, 2021; and February 17, 2022-, giving an average maturity of 10 years.
The issue comes with a coupon of 12.75%, the highest ever in Venezuela's history, and its selling price will be 100% of the nominal value (i.e. Bs.F.4.30 for every US$100 purchased).
It is estimated that the bond will be traded on the Luxembourg stock exchange at around 80% of its nominal value, which would give purchasers of the bond an implicit exchange rate of approximately Bs.F.5.30:US$, after deducting transaction costs.
What is most surprising is the urgency with which this bond is being issued. It was announced on Wednesday, February 9, and potential buyers have until 11 a.m. on Friday, February 11, to indicate their interest in acquiring them; in other words, they have less than two days to react.
It looks as though the issue will have two winners and one big loser.
The first winner will be PDVSA, which will obtain Bs.F.12.9 billion, so easing its cash crisis, and the second will be anyone fortunate enough to obtain dollars at an implicit exchange rate of Bs.F.5.30:US$.
The big loser will be the Venezuelan nation, which will not obtain a single dollar for this issue, as PDVSA will receive bolivars and it will be the buyers who will have access to dollars.
Finally, it is worth noting that, if these bonds are traded on the international market at 80% of their nominal value, the yield at maturity – which is the same thing as the real cost for the country- will be more than 17% per year, an exaggeratedly high “money cost,” and yet further proof of the Chávez administration's incompetence in financial matters.
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 Veneconomy , on February 10, 2011. Petroleumworld reprint this article in the interest of our readers.
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Petroleumworld News 02/11/2011
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