WASHINGTON, Oct 7 (IFR) - The fate of a debt swap from PDVSA
was thrown in doubt on Friday after the Venezuelan oil company
extended the deadline for the transaction and ConocoPhillips
sued over the use of Citgo shares as collateral.
PDVSA bonds suffered a multiple point drop as investors
expressed concern that a failure to extend maturities on
short-term debt would bring the state-owned company closer to a
"We could be back to square one with an intense redemption
calendar that makes it hard for PDVSA to cover," an investor
attending the IMF and World Bank meetings in Washington told
Intensifying the focus on the troubled oil exporting nation,
Venezuela's central bank head Nelson Merentes was scheduled to
attend a small gathering with investors organized by Deutsche
Bank on Friday afternoon.
Venezuelan bonds opened several points lower on Friday, with
the 2017 notes initially down five to six points and the rest of
the curve opening three to four points weaker, according to one
They later clawed back roughly half of their intraday losses
on the expectation that PDVSA may have to improve the terms of
the offer for the second time since the exchange was launched on
PDVSA's decision on Thursday to extend the early tender
deadline of the swap to October 12 suggested to many that the
company had received an underwhelming response to its offer,
which targets US$7.1bn of bonds maturing in 2017.
"As of the prior early tender deadline, substantially less
than 50% of the aggregate principal amount of the existing notes
have been tendered," the company said Thursday.
PDVSA sweetened the transaction last month when it offered
more new 2020 bonds backed by shares of its US oil unit Citgo in
exchange for bonds maturing in 2017.
The new terms were largely viewed as net present value (NPV)
positive, but some investors preferred to hold existing bonds to
benefit from the initial secondary pop on news of improved terms
and the prospects of getting paid at maturity.
"We are going to be free-riders," said a second investor at
the IMF meeting, who noted that his Venezuelan holdings were his
second-largest contributor to performance this year.
But gains were reduced by the sell-off Friday sparked by the
extended deadline and a lawsuit filed by oil producer
ConocoPhillips against PDVSA in a Delaware court the day before.
"This could be a bargaining tactic to dissuade some of the
free-riders," said Sean Newman, a senior portfolio manager at
In the complaint, ConocoPhillips said PDVSA's pledge of
equity in Citgo as collateral for the bond swap was part of a
fraudulent scheme to prevent Conoco from collecting compensation
in an ongoing dispute with the Venezuelan government.
The news was seen further complicating the swap and
exacerbated worries about the sovereign, which already faces
several arbitration claims from foreign companies.
"It has become very complex legally," the first investor
Others think that the latest claim from ConocoPhillips won't
necessarily sabotage the exchange.
"This is not the first time that this kind of suit has been
made," said Newman. "Whether or not it can stop the exchange, it
is hard to say."
(Reporting by Paul Kilby and Davide Scigliuzzo; Editing by Marc