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Venezuela PDVSA to sell $3 billion in reopen 2017 bond

CARACAS, Nov 18, 2010

Venezuelan state oil company PDVSA will reopen its 2017 bond within two weeks to raise $3 billion, a senior government source told Reuters on Wednesday.

The source, who asked not to be named, also forecast Venezuela's long recession will end in the fourth quarter, with the economy growing 1 percent in that three-month period.

A swap of 2011 PDVSA bonds for a new 2013 bond with better conditions closed last week after anemic interest from investors. For details, see [ID:nN1598735]

The reopened issue VE055409692=RRPS will have the same 8.5 percent coupon as the original sale, the source said. "PDVSA will pay the central bank with a reopening of the 2017. It should be soon, no more than 15 days," the source said.

The Central Bank will take at least $2 billion of the bonds as payment for a debt from PDVSA, the source added. It was unclear what the other $1 billion would be used for or where it would be sold.

The cash-strapped oil company next year expects to pay a large bill to Exxon Mobil ( XOM.N ) for a nationalized project. It must also pay back the 2011 bond and has outstanding debts to service providers.

Overall, Venezuela's economy should contract no more than 1.5 percent in 2010, the source said. A budget document last month said the economy would contract 2.5 percent in the year.


Either way, the country is the last in South America to remain in recession following the global financial crisis. It also suffers from one of the world's highest inflation rates.

The South American OPEC member's GDP contraction narrowed 0.4 percent in the third quarter, after bigger falls in the first two three-month periods. [ID:nN16155394]

"The change in tendency shows that this economy is going to start to grow (soon)," Economy Minister Jorge Giordani said at an event in Caracas on Wednesday.

President Hugo Chavez's government says the global crisis and lower oil production under OPEC quota cuts are to blame for the recession since early 2009, but critics says his socialist policies including nationalizations are hurting productivity.

"The policy mix is turning definitely more state-centred and private sector-unfriendly as we move closer to a classic command economy," wrote Goldman Sachs analyst Alberto Ramos in a report on the Q3 data out this week.

"Venezuela is still mired in a protracted recession despite favorable oil prices," he added, saying recovery would be sluggish and driven in part by a favorable statistical base given the slump of the last two years.

Chavez has accelerated his nationalization drive in recent weeks, and also at the weekend announced the imminent opening of a state-run "socialist" stock and bond exchange.

Though it is still not clear how the new market will work, PDVSA has sought permission to trade its bonds on the public bourse. [ID:nN15253746]

In Venezuela's tightly-controlled and multi-layered exchange market, local companies and individuals are able to use dollar-denominated bond issues as a way to obtain foreign currency for their bolivars at a normally favorable rate.

Story by Eyanir Chinea and Frank Jack Daniel from Reuters
Wed Nov 17, 2010 5:29pm EST



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