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Venezuela/PDVSA debt deadlines: Will oil cover February?


A default is becoming hard to avoid. How long can Venezuela /PDVSA continue to finance via arrears before converting into fixed U.S.-dollar liabilities?

NEW YORK
Petroleumworld.com 02 06 2017

The government of Venezuela and state-controlled oil company Petroleos de Venezuela together face $10 billion in debt payments this year, though April deadlines could prove especially onerous and February's burden is sizable.

The government is on the hook this year for $3.4 billion and Pdvsa, $6.6 billion — with $2.9 billion due mostly by Pdvsa in April, according to a Caracas Capital . It puts the total debt burden of Venezuela, an oil producer and OPEC member, at $71 billion, not including a number of special arrangements including loans from China to be paid back with oil shipments .

Nomura Securities debt strategist Siobhan Morden , wary after Venezuela's payment delay in November , is focused on Venezuela's February debt payment burden of $705 million. She expects the government to muddle through as oil prices rise. She warns that the government has not released balance of payment statistics since the third quarter of 2015, so estimates from pundits are just that:

” … We are now entering into a heavy coupon month with higher oil prices providing a buffer but still latent concerns after payment delays last November. … There is risk of underestimating U.S.-dollar liabilities on the growing arrears that eventually converts into fixed income liabilities and a higher service deficit including payment to oil suppliers (maturing promissory notes), payments to joint ventures and other incidental payments such as headlines on delays of oil shipments for arrears on tanker cleaning and inspection fees. How long can Venezuela/PdVSA continue to finance via arrears before converting into fixed U.S.-dollar liabilities? The newswire reports are also disconcerting on higher exports to China @ 555,000 barrels per day; however this may not challenge the assumption of a grace period of payments if [it is] cashed-in exports as opposed to payment in kind on loans …”

See our posts Venezuela & Oil Debt: “Default Probable,” Fitch Says and Gartman On Gold: Venezuela's A Seller . Also see Morden's analysis of assets that can be used for payments: Venezuela Debt Default? Nomura Counts The Cash .

Venezuela government bonds were among the holdings in the  iShares JPMorgan USD Emerging Markets Bond exchange-traded fund  ( EMB ), and Pdvsa bonds were among the holdings in the  VanEck Vectors Emerging Markets High Yield Bond ETF  ( HYEM ), as of Dec. 30, according to Morningstar. But there are no Venezuela equities in the iShares Latin America 40 ETF ( ILF ), which is moving higher today.



Story by Dimitra DeFotis from Barron's.

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