CARACAS, Sept 22 Venezuela's government would
benefit from state oil company PDVSA's proposed $7 billion debt
swap through improved cash flow and fewer difficulties in
obtaining external financing, ratings agency Moody's Investor
Service said on Thursday.
PDVSA, struggling under low oil prices and an
economic crisis at home, this month offered investors the chance
to exchange bonds maturing in 2017 for a new 2020 bond backed by
shares in its U.S. subsidiary Citgo Holding Inc.
"From a sovereign credit standpoint, PDVSA's exchange is
credit positive for Venezuela ... because at a time of severe
external liquidity stress, it frees up hard currency that the
government can use for other payments, including its own debt
service," Moody's analysts wrote.
Venezuela and PDVSA are frequently seen as similar credit
risks because of the close relationship between PDVSA's
management and the ruling Socialist Party. The OPEC nation
depends on oil for almost all of its foreign currency revenue.
PDVSA's bonds gained across the board on Thursday, led by
the PDVSA 2035 that was up 1.200 points to a bid
price of 49.550. Venezuela's sovereign bonds were also up, with
the 2018N bond up 2.500 points to bid 64.500.
Wall Street initially panned PDVSA's swap offer as
insufficiently attractive. But investors have in recent days
warmed to the idea that the Citgo guarantee would make the new
bond safer than PDVSA's other outstanding issues.
The company says it will continue paying down its other
bonds even if investors turn down the swap, which requires 50
percent bondholder participation to take effect.
Ratings agency S&P this week described the proposed
operation as "tantamount to default" if completed. Fitch Ratings
said it expected to rate the new 2020 bond "CCC/RR4(exp)",
which it said "suggests a real possibility of default."
PDVSA President Eulogio Del Pino responded by describing
ratings agencies as "professional speculators" who were
contributing to a negative perception of the swap.
The company borrowed heavily during the oil boom and now
faces falling production and an unraveling socialist economy
whose currency controls and hefty subsidies have taken a toll on
the oil industry.
President Nicolas Maduro says the country's problems are the
result of an "economic war" led by political adversaries to
weaken his government.
(Reporting by Brian Ellsworth; Editing by Meredith Mazzilli)