PdV bond swap proposal under wraps: Update
The company issued a statement late today with basic details, but bondholders contacted by Argus had yet to receive a formal prospectus.
The bonds that PdV expects to swap for a new PdV 2020 bond with an 8.5pc coupon include a \\$3bn PdV 2017 bond with a 5.55pc coupon that matures on 12 April 2017, and a PdV 2017 bond with an 8.5pc coupon, the company said. The latter bond originally was a \\$6.15bn issuance on which PdV still owes \\$4.6bn of principal due for payment in two installments on 2 November 2016 and 2 November 2017.
The new PdV 2020 bond will have four annual principal payments and will be collateralized with 50.1pc of the shares of Citgo Holding.
Holders of the two PdV 2017 bonds have 20 days counted from today to participate in the voluntary bond swap offer, PdV said.
PdV is hard-pressed to honor looming debt payments. The company's oil production is declining and shrinking export volumes are fetching far lower prices than two years ago.
The company is currently obligated to pay \\$1.1bn on 28 October, followed by \\$2.3bn on 2 November.
The company had yet to issue a prospectus for the voluntary bond swap announced on 13 September by energy minister and PdV chief executive Eulogio Del Pino because the details were still not finalized, two government officials with direct knowledge of the proposed transaction told Argus earlier today.
Del Pino's 13 September announcement that terms of the voluntary bond swap were ready was "premature and unhelpful," one of the government officials said. "Del Pino should have waited until next week."
"We invite all bondholders to review the pamphlet on the swap offer which will be published on our website and which will have all the details they need. We hope the majority of bondholders accept this, and those who don't will miss a tremendous opportunity," Del Pino said in a 13 September televised interview.
In a Twitter message on the same day, Del Pino said the information was already on the website.
PdV and Credit Suisse, which is managing the swap plan agreed "months ago to maintain utmost confidentiality" until the plan was ready for marketing with a final prospectus and term sheet for issuance to bondholders and the news media," the official said.
Del Pino's remarks created market expectations that crumbled when PdV and Credit Suisse failed to issue any details or terms.
Del Pino's untimely announcement "was not a good way to start a critical financial transaction that was designed to avert PdV's default," another government official says.
Local and foreign bond traders concur that up to 60pc of bondholders must participate in the swap for it to succeed. "But over 70pc participation would be better," a Caracas trader said.
Key technical issues still under discussion by PdV and Credit Suisse when Del Pino jumped the gun include pricing and the legality of guaranteeing the new 2020 bond with shares in PdV's US subsidiary Citgo Holdings.