NEW YORK, Sept 19 (IFR) - The 2017s issued by Venezuelan oil
company PDVSA were about 1.5 points weaker Monday as investors
largely shunned the terms of a debt exchange targeting US$7.1bn
of those securities.
The 5.25% 2017s were spotted at 72.00-73.00 after starting
the day down two points at around 71.50-72.50, while the 8.5%
2017s were at 77.00-78.00 after opening at 76.50-77.50.
If successful, the long-awaited liability management
operation would give the beleaguered oil exporter some relief
from a wall of maturities falling due over the coming months.
And while a good chunk of the 2017s are thought to be held
by compliant government entities, PDVSA will likely need to
bring in a critical mass of foreigners to get past the 50%
participation rate set by the company.
"The swap looks like it would be more appealing to locals
than foreign investors, given the 1:1 ratio in addition to the
uncertainty over the value claims on Citgo," said Sean Newman,
senior portfolio manager at Invesco.
PDVSA announced Friday that for each US$1,000 in principal
of existing 2017s, bondholders would receive an equal amount of
new 8.5% amortizing 2020s, backed by a first-priority interest
on 50.1% of capital in Citgo Holdings.
After the early bird deadline of September 29, however,
holders will receive US$950 of new notes for every US$1,000 of
old securities exchanged.
That initial par for par offer disappointed many market
participants who said a higher ratio would be required to make
the transaction NPV-positive for holders.
"It is difficult to get past the fact they are asking for 1
to 1," said Siobhan Morden, head of Latin American strategy at
"They are starting with an NPV negative (transaction) and
are looking to the Citgo stock to compensate. That is a
difficult starting point."
How accounts value the Citgo pledge will likely make all the
difference when holders are deciding whether to participate or
"People are just waiting and studying the value of the Citgo
pledge," said a broker.
Credit Suisse is acting as financial advisor on the exchange
(Reporting by Paul Kilby; Editing by Marc Carnegie)