Venezuela, PDVSA bonds higher after word of debt payment; Russia prices $4 billion taps

By Rebecca Melvin

New York, Sept. 21 – Venezuela sovereign and Petroleos de Venezuela SA bonds traded better intraday Thursday as word hit the tape that a missing payment on the Venezuela 2027 notes due Sept. 15 had been paid, a market source said.

The payment due on the Venezuela 2027 bonds was for $155 million or $185 million. The government had tweeted out late Wednesday that the payment was delayed due to technical difficulties.

Investors took the situation in stride, with the Venezuela curve trading flat for several days this past week, having bounced off the lows notched two weeks ago and hanging mostly in the upper level of the range, a market source said.

The market was well bid on Thursday, an East Coast-based trader said. On Wednesday the market pulled back in reaction to reports that the government was missing the payment, slipping a point or so, and then reacted positively after the government’s tweet.

The Venezuela 2027 notes were seen 38½ bid, 39½ offered Thursday afternoon, after trading at 38 early in the session.

“We’re seeing demand for that one,” the trader said. There was also demand for the PDVSA 2031 and 2035 notes.

In general, Venezuela was up about ¼ to ½ point across the board on Thursday.

Nevertheless, there are concerns that U.S. sanctions are slowing down transactions, and that they could interfere with the sovereign’s ability to pay on its debt.

The sanctions were implemented Aug. 25 and take aim at preventing Venezuela from refinancing.

“The sanctions are slowing down the flow of money in Venezuela business in U.S. dollars as some banks are reluctant to move that money, a trader said.

People like oil contractors get their money in dollars to their Chase account, for example, and Chase stops the transfer and asks a lot of questions, afraid the money will be used to refinance, the trader explained.

But so far the market is downplaying the risk, with most of the bonds hovering right around 40, showing that the risk is being priced in, but not dropping further.

The 2027 notes were 41¼ on Friday, Aug. 25, and then down to 39½ on Monday, Aug. 28, a trader said.

Meanwhile, the PDVSA 2017 bonds, which mature Nov. 7, jumped to 94¼ and were seen 94½ bid, 95½ offered on Thursday, after trading around 92 bid, 93 offered, or little changed for the last three days.

One source noted that while the market is not too worried now, the upcoming principal payment and maturity have no grace period and have to be paid on time.

PDVSA has a payment of around $800 million due on its 2020 notes on Oct. 27 and a $1.12 billion maturity on the 2017 notes the following week on Nov. 7.

“There is $2 billion due in total at the end of October and beginning of November,” the market source said.

Elsewhere, Russia priced $4 billion of taps of its notes due 2027 and 2047, raising the total amount outstanding in these issues to $7 billion.

The $1.5 billion of 4¼% notes due 2027 priced to yield 4%, according to a market source. The original $1 billion issue of 4½% bonds due 2027 was priced at par on June 21. There is now $2.5 billion outstanding of the 2027 bonds.

The $2.5 billion tap of the 5¼% notes due 2047 bonds priced to yield 5¼%. The original $2 billion issue of 5¾% bonds was also priced at par on June 21. The total amount outstanding of the 2047 bonds is now $4.5 billion.

Also reported, PKO Bank Hipoteczny SA, a subsidiary of Poland’s PKO Bank Polski, priced €500 million ¾% seven-year notes at 99.906 to yield 0.764%, or mid-swaps plus 28 basis points on Thursday, a market source said.

© 2015 Prospect News.
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