PDVSA Offers Debt Exchange to Service Providers
May 23 2016 - 9:50PM
Dow Jones News
CARACAS—Venezuela's cash-strapped state oil company is offering
service providers a debt exchange, proposing to swap $2.5 billion
worth of debt for dollar bonds, according to two contractors who
were offered the deal and documents reviewed by the Wall Street
Journal.
Under the deal, a subsidiary of PetrĂł leos de Venezuela SA,
known as PDVSA, would issue a three-year international bond and
hand it to approved suppliers in exchange for cancelling some of
the $20 billion worth of unpaid invoices. The bond would be priced
at about a 40% discount to the company's benchmark obligation,
which currently trades at about 45 cents on the dollar, said the
sources and the deal prospectus.
PDVSA representatives began sounding out local and international
suppliers last week to gauge interest in the swap, and the company
has hired Miami firm CP Capital Securities to arrange the
transaction, said the sources. PDVSA and CP Capital didn't reply to
requests for comment.
"CP Capital has been hired to advise PDVSA on the exchange of
commercial invoices for financial debt with a minimum amount of
$2.5 billion," read a deal prospectus viewed by The Wall Street
Journal.
Venezuela's oil production has slipped 150,000 barrels this year
to 2.5 million barrels per day, according to the Organization of
the Petroleum Exporting Countries, as service giants Schlumberger
and Halliburton reduced activity because of unpaid bills. The
government has been struggling to boost output to alleviate acute
shortages of imported food and medicine, which are fuelling riots
and looting across the country.
Both contractors interviewed by the Wall Street Journal said
they would reject the deal in its current form, as the value of the
offered bonds is less than the amount of debt they expect to get
back through litigation.
The bond issue would raise the financial burden for a government
already struggling to meet its international obligations. The
Venezuelan government and PDVSA are due to make about $6 billion
worth of bond payments through the end of the year, obligations
which consultancy Sintesis Financiera believes can only be met by
cutting imports of basic goods to the lowest per capita levels
since the 1950s.
(END) Dow Jones Newswires
May 23, 2016 21:35 ET (01:35 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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