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Venezuela's currency gains for third day on PDVSA bond sale
By Guillermo Parra-Bernal
Bloomberg
CARACAS
Petroleumworld.com 03 28 07Venezuela's currency gained in unregulated, parallel-market trading as the $5 billion dollar- denominated bond sale today by state oil company Petroleos de Venezuela SA may help meet demand for dollar-denominated assets.
Petroleos said in a statement that its bonds were priced at 105.5 cents, or $1.05, each. The offering from the Caracas-based company may include $2 billion of 10-year dollar notes with a coupon interest rate of 5.25 percent, $2 billion of 20-year notes with a 5.375 percent coupon and $1 billion of notes maturing in 2037 and bearing a coupon of 5.5 percent.
``This issuance may temporarily contain the parallel exchange-rate depreciation and price pressures, by supplying much needed foreign exchange to the market,'' Tania Reif, an analyst with Citigroup Inc. in New York, wrote in a report.
The bolivar jumped about 7 percent to 3,640 bolivars per dollar in the parallel market, the highest since Jan. 8, traders said. On March 23 the bolivar gained 5 percent.
The government keeps the currency at an official exchange rate of 2,150 per dollar, 41 percent stronger than the parallel market rate. The bolivar gained 1.3 percent last week, its first weekly increase in three weeks.
The Petroleos bonds will pay interest and principal in dollars. Local investors may be allowed to purchase the securities with bolivars. ABN Amro Bank NV and Econoinvest Casa de Bolsa CA are managing the sale, which closes March 29.
Inflation Hedge
Venezuelans often buy dollars or foreign currency denominated assets to protect savings against inflation or bend currency trading restrictions that President Hugo Chavez imposed in 2003. Annual inflation quickened to 20 percent in February, the fastest pace in more than two years.
``The rally in the currency should perhaps stop right here at where the bolivar is today,'' said Osvaldo Rangel, a trader with Global Capital Valores in Caracas. ``So far, there's interest from the public on the issue. But it's up to investors to decide whether the price and the coupons are good enough.''
The prospect of a shortage of U.S. dollars, and concern over Chavez's nationalizations of phone and energy companies boosted purchases of foreign exchange, making the bolivar the world's worst-performing currency this year while also fanning inflation.
The currency has shed 7 percent this year. In a bid to curb the growing importance of the parallel dollar market, government officials said in January that people who buy and sell dollars in unregulated markets, or means outside the legal, government channel, may be subject to prosecution.
Secondary Market
The 2017 bond may change hands at about 80 percent of face value once it begins trading by the end of this week or the start of next, according to a report by Caracas-based banking research company Aristimuno Herrera & Asociados.
Investors may also try to sell the bond in the secondary market in coming weeks and try to take the proceeds out of the country, the company said. The government expects as many as 200,000 individual investors to participate in the transaction.
Stocks and government bonds fell as banks, which can only hold a portion of their capital in foreign currency-denominated assets, sold other dollar-linked notes to raise cash to buy Petroleos bonds.
The yield on the 5.25 percent dollar-linked bond, known as TICC, climbed 8 basis points, or 0.08 percentage point, to 4.73 percent, according to Banco Santander Central Hispano SA's brokerage. The price, which moves inversely to the yield, fell 0.8 bolivar to 104.75 bolivar.
The TICC bonds now yield 2 basis points more than the U.S. Treasury maturing in February 2019. On March 23, the bond yielded 6 basis points less than the 2019 Treasury.
The Caracas Stock Exchange Index fell for a second day, dropping 0.6 percent to 47,654.1.
To contact the reporter on this story: Guillermo Parra-Bernal in Caracas at gparra@bloomberg.net
Last Updated: March 26, 2007 16:38 EDT
Bloomberg 27 03 07
Copyright© 2007 Bloomberg. All Rights Reserved.
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