On Monday, PDVSA – the state-owned oil company – announced that it would make a third plea with investors over $5.3 billion worth of bonds and extended a swap offer to October 21. Earlier this month, PDVSA offered investors the chance to swap bonds due at the end of this year for bonds that they could cash in 2020.
The move set off alarms in the financial world, as it signaled the probability that PDVSA simply did not have the money to pay investors back this year. In response to the swap offer, Standard & Poor’s lowered PDVSA’s credit rating from CCC (“Substantial Risk”) to CC (“Extremely Speculative”).
Monday’s deadline extension came as a result of what PDVSA calls “substantially less” interest from investors to take up the swap than it had anticipated. In a press release issued by PDVSA, the company said that less than 50% of the bonds it hoped to swap had actually been swapped.
In the same release, PDVSA gave a dire warning to investors of what could happen to the company if the bond swap offer is not successful:
If the Exchange Offers are not successful, it could be difficult for the Company to make scheduled payments on its existing debt … which would result in the Company evaluating all alternative options.
Francisco Rodriguez, the chief economist at the Torino Capital firm, told El Universal that even if investors continue to refuse to bite, PDVSA might not necessarily be doomed. Rodriguez explained that the Banco Central de Venezuela (BCV) might be able to be of some help to the oil company, saying:
The government could sell the 2020 bond [the one PDVSA is hoping to get from investors] via a private offering to the BCV and then let the central bank sell a small fraction in a second offer to the secondary market. This would allow the market to figure out a price of this new bond and would help to resolve the uncertainty over the swap offer.
PDVSA’s potential demise is of paramount importance to all of Venezuela, since well over 90% of the country’s income enters the country directly through the oil company.
NA Report: $11 Billion Embezzled Through PDVSA in 10 Years
A report by the National Assembly released today has found that at least $11 billion dollars were embezzled out of PDVSA between 2004 and 2014. The figure comes after an analysis of the company’s expenses found the money had simply disappeared, mostly through “irregular” contracts.
Deputy Freddy Guevara headed the investigation. He spoke on the finding, saying:
We’re taking about $11 billion dollars that cannot be justified. $11 billion that we have no way of knowing where they’ve ended up, why they were spent, or who spent them.
PDVSA is also currently embroiled in a scandal involving U.S. authorities and the Banca Privada D’Andorra, an Andorran bank. The bank became the target of an investigation last year, and PDVSA is suspected of having laundered at least $4.2 billion through that institution alone.
Tachira To Start Importing Its Own Medicine
Jose Vielma Mora, the PSUV governor of Tachira state, announced yesterday that Tachira will begin importing its own medicine and medical supplies in order to help stock the state’s hospitals and pharmacies. The move is an unprecedented response to the country’s chronic medical scarcity crisis that has left hospitals and pharmacies largely devoid of medicine and other supplies.
Vielma Mora announced the measure by saying:
We already have permission from the Ministry of Health to sign the authorizations to bring medicine from Panama, the United States, Colombia, Brasil and Ecuador to sell in Tachira to all drug stores, pharmacies – public and private -, clinics and hospitals.
Vielma Mora also suggested that the measure would not come at an unreasonable price for institutions and establishments in need of medicine:
I will sell [the medicine] for cheap to any clinic that needs it.
At the same time, Vielma Mora admitted that the national government has made mistakes when it comes to its handling of the economy, but reminded reporters that these errors are being committed in a quest to help the poor.
Maduro Announces “Lighting Tour” to Try to Fix Oil Prices
Maduro announced last night that he would leave on a “lightning tour” through OPEC and non-OPEC countries with the goal of somehow forcing world oil prices up. Maduro did not give any concrete details regarding the date, length and destination(s) of his trip.
Maduro made the announcement during his weekly television show last night, saying:
In the coming days, weare contemplating a schedule [sic]. I’m going to go on a lightning tour, as lighting as deep [sic] to various oil [producing] countries, OPEC and non-OPEC, to bring with me a proposal to definitively seal the deal with the OPEC and non-OPEC countries to stabilize the oil market and allow the prices to rebound to an acceptable level.
Maduro has said in the past that he believes that the “fair price” for a barrel of oil should not be below $70.
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