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Venezuela defaults on PDVSA 2020 bond, setting up legal showdown

By Ben Bartenstein / Bloomberg

Petroleumworld 10 29 2019

The team advising Venezuelan National Assembly President Juan Guaido skipped a payment Monday on the nation's only bonds not in default, setting up a legal showdown with creditors.

Rather than pay the $913 million due on Petroleos de Venezuela 's 2020 notes, Guaido's advisers say they will take legal action against investors to fight any efforts to seize the collateral on the bonds -- 50.1% of Citgo Holding Inc. 's shares. Their argument is that the debt is illegal because the opposition-led National Assembly never approved its issuance. On Thursday, the Trump administration moved to temporarily shield the collateral from creditors.

“Despite all the efforts to date, the ad hoc administrative board of PDVSA hasn't achieved a reasonable arrangement with the bondholders,” the board said in a statement. The board “will take legal actions aimed at protecting its rights based on the invalidity of the 2020 bonds.”

Looming PDVSA Default Pits Ashmore Against Venezuela's Guaido

Luxembourg-based Clearstream Banking and Brussels-based Euroclear, the clearinghouses for the debt, didn't receive the $843 million in principal and $71 million in interest due Monday, according to two people familiar with the matter.

Guaido, recognized by the U.S. and nearly 60 countries as Venezuela's interim president, scored a last-minute victory on Thursday when the Treasury Department updated its sanctions guidelines to block creditors from seizing their collateral for 90 days. With the Trump administration's support, Guaido and his allies effectively run Houston-based Citgo, yet have little operational control over its Caracas-based parent PDVSA.

London-based Ashmore Group Plc holds about half of the PDVSA 2020 bonds, according to data compiled by Bloomberg. BlackRock Inc. , T Rowe Price Group Inc. and the Royal Bank of Canada are among the other top reported holders.

Story by Ben Bartenstein from Bloomberg. / 10 28 2019


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