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Venezuela vows no sanctioned officials at creditor meeting - sources

Reuters  |  CARACAS/NEW YORK 

By Corina Pons and Davide Scigliuzzo

CARACAS/NEW YORK (Reuters) - has promised investors that officials under sanction by the United States will not participate in a debt restructuring meeting in Caracas next week, three market sources told on Thursday.

President Nicolas Maduro has urged bondholders to meet for talks with officials from the cash-strapped OPEC nation, which is struggling under a failing socialist economic system and Washington sanctions that block it from refinancing debt.

The U.S. Treasury added 10 relatively low-ranking officials, including ministers, to the list of Venezuelans under sanction on Thursday, who it said were involved in undermining democracy, media censorship and corruption.

Meanwhile, creditors of Venezuela's state oil company PDVSA have asked derivatives trade organization ISDA to determine whether a credit event has occurred with respect to a delayed bond payment. ISDA has said it will consider the request on Friday.

The promise of a Caracas meeting without sanctioned officials could make some investors more interested in participating.

Many have been reluctant about the idea of meeting with the chief debt negotiators - Vice President Tareck El Aissami, who is under U.S. sanction for alleged drug trafficking, and Economy Minister Simon Zerpa, who has been sanctioned for corruption.

"The Venezuelan is promising that officials under sanction will not be in the meeting," said one local finance industry source, with knowledge of the preparations for Monday's meeting.

In New York, two other sources who are knowledgeable of the Venezuelan debt situation said they had heard the same proposal.

Venezuela's Information Ministry did not immediately respond to a request for comment.

The U.S. Treasury has warned bondholders that dealing with the sanctioned debt negotiators would be "problematic" and could lead to stiff penalties.

Creditors are not prohibited from attending meetings, but are barred from any dealings with officials affected by the sanctions.

The of U.S. President Donald Trump issued the sanctions this year, accusing Maduro's of undermining democracy and violating human rights.

Many investors maintain other reservations about joining the meeting, including the security considerations of violence-torn Caracas.

"I personally do not know anyone who would entertain this 'invitation,'" wrote a fund manager at a U.S.-based Emerging Markets advisory boutique. "I can tell you right now that there's no way my wife (and mom) would let me go!"

Creditors have also said Maduro's message last week was muddled, and the purpose of the meeting unclear.

Maduro said he wanted to restructure, but also vowed to continue making debt payments. Investors say they would have little reason to participate in renegotiation talks if payments continue, and that such talks generally begin after a default has taken place.

CREDIT EVENT

The International Swaps and Derivatives Association (ISDA) website showed PDVSA was on its agenda for Friday at 11 a.m. EST (1600 GMT).

The full payment for PDVSA's 2017N bond of $1.169 billion, which includes $1.121 billion in principal and $47 million in interest, was due on Nov. 2. Market sources said on Wednesday that PDVSA had transferred most of the funds to make the final payment, but investors had still not received the money by Thursday.

If ISDA determines that a 'credit event' has taken place, that could allow creditors to collect on derivatives known as credit default swaps, a form of insurance against default.

Since October, and PDVSA have been skipping interest payments, invoking a 30-day grace period in an apparent effort to ease a cash crunch that has left the country desperately short of basic goods such as food and medicines.

Maduro said last week that the bond would be paid in full. He says the country is victim of an "economic war" led by his political adversaries and fuelled by Washington's sanctions.

An ISDA spokeswoman said Friday's meeting may not be conclusive. "It is always possible that they will need more time to deliberate," said the spokeswoman, who asked not to be named, in an email to

PDVSA did not immediately respond to an email seeking comment.

(Additional reporting by Umesh Desai in Hong Kong and Lesley Wroughton in Washington, writing by Brian Ellsworth,; Editing by David Gregorio and Rosalba O'Brien)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Fri, November 10 2017. 00:48 IST
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