CORPOELEC, the state-run national electrical company, appears to have officially entered default on a bond payment worth $28 million that was due yesterday. The interest was accumulated on a bond worth $650 million held by a company called Wilmington Trust.
The payment was initially due on October 10, but CORPOELEC was granted a 30-day grace period to make the payment. The grace period ended yesterday, and the payment was never made.
Wilmington Trust issued a statement on the fact, part of which reads:
The Issuer’s failure to pay interest on the Notes when due on October 10, 2017 constitutes a Default under the Indenture.
Below, an image of the notice of default issued by Wilmington Trust regarding the bond:
However, CORPOELEC issued a statement through a Twitter account claiming to have made the payment on November 8, and suggesting that “operational changes” might have been the source of the confusion without providing any explanation:
The funds corresponding to the payment of EDC2018 (8.5% Notes due 2018) was transferred to financial institutions on 08/11. Operational changes have affected transactions.
It is not clear at this time if Wilmington Trust has in fact received the payment.
If CORPOELEC is in fact in default, the event would be an important marker of the financial collapse of the country, since the Maduro regime has made it a point to always pay its foreign debt obligations. It also comes just a week after Maduro announced that the country would restructure all of its foreign debt given the financial crisis affecting the country.
Shadow of Default Looms Over PDVSA
The International Swaps and Derivatives Association (ISDA) will meet in New York City on Monday to decide if the state-run PDVSA oil company “experienced a credit event” in regards to a bond payment that was due early this month.
he payment, worth $1.12 billion, was due on November 2 but was not made in full. It is not yet clear how much of the payment PDVSA managed to make. Reuters cited “market sources” on an article published on Wednesday as saying that PDVSA had made “most” of the payment.
The ISDA meeting will determine whether or not PDVSA is in default on the payment. Speaking on the possible outcome of the meeting, Stuart Culverhouse–a chief economist at Exotix Capital–told Reuters:
We expect if holders do declare a default then that could be used to trigger cross default across the whole US$28bn of PDVSA bonds (…) [Or, bondholders] may simply give the government more time to make the payment, as the intention seems to be there, but coordinating a large group of holders with different incentives could prove challenging.
Machado: “They Must Think We’re Stupid”
Maria Corina Machado, the head of the Vente Venezuela (VV) party, reacted today to the news that the country’s main opposition coalition and the ruling PSUV party would once again attempt to engage in dialogue starting next week.
Machado–who is one of the most radically anti-regime politicians in the country–was blunt with her assessment of the news:
In the same place, with the same people, and with the same “agenda”. But now they say “Now we are REALLY going to ‘dialogue'”. Seriously? They must think that we’re stupid.
Machado has been arguably the loudest and most outspoken critic of the Maduro regime in recent years. She was among the first high-profile politicians to begin calling the regime a dictatorship. Machado withdrew the VV party from the Mesa de la Unidad Democratica (MUD) in August after the bloc agreed to participate in the October 15 gubernatorial elections, since she considered that the process would be rigged in favour of the PSUV.
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