Venezuela, which has still paid its foreign debts, despite the deepest recession in the economy, is facing a default. After reports that the country has not paid off with Russia, because of which it will lose almost $ 1 billion in 2017, a member of the International Association of Market Participants of Swaps and Derivatives (ISDA) asked her whether this fact should be qualified as " Credit event ». The ISDA will need some time to prepare a response. If it is positive, the conditions for credit default swaps (market insurance) for sovereign bonds of Venezuela of about $ 36 billion will work. True, this will not mean automatic default on the government's liabilities themselves. However, the terms of issue of these bonds suggest that in the event of any other missed payment on any debt, their holders may demand immediate repayment.
The default on state bonds will not affect the circulating bonds of the state-owned oil company PDVSA, whose volume is $ 35 billion.
Analysts have predicted more than once that the government will stop paying its obligations. But while President Maduro, despite a 27% drop in GDP in four years and a third-month street protests, remains in power. However, the events of the past two weeks show that the government is making more and more desperate attempts to find at least some means.
In late May, Goldman Sachs Asset Management (GSAM), a division of the investment bank Goldman Sachs, acquired for $ 865 million PDVSA bonds with a par value of $ 2.8 billion. They were issued in 2014, but not placed on the market, and quietly sold to the Central Bank of Venezuela. He sold them to GSAM through an intermediary for 31% of the par value.
The deal, when it became known, caused a flurry of criticism from the Venezuelan opposition. The protest rally also took place at the headquarters of Goldman Sachs in Manhattan, its participants called the paper bought by the bank "hungry bonds".
Non-payment of friendship is not a hindrance
The federal budget of Russia in 2017 will not receive 53.874 billion rubles. Due to the fact that Venezuela has not complied with the terms of the intergovernmental protocol of September 2016. This was reported on May 7 by the Accounting Chamber in conclusion on the budget bill for 2017 and 2018-2019. As of September 23, 2016, Venezuela's total debt was $ 2.84 billion, the Russian government said at the government's disposal of signing the protocol.
Overdue debt on principal and interest was consolidated, and payments on it were postponed to 2019-2022 by semi-annual payments. This was explained by the liquidity crisis in Venezuela and "the desire to further develop and strengthen the friendly relations existing between the two states." The remaining interest of $ 87 million was due on September 30, 2016, and the main debt of $ 2.21 billion was to be extinguished in the period from March 31, 2017 to September 30, 2021.
But recently there was information that the Venezuelan authorities are trying to organize a similar deal already with government bonds - by $ 5 billion with a repayment in 2036. They were also sold without official messages in the last days of 2016 to one Venezuelan state bank, and now brokers are offering Their foreign investors for 20% of the face value. That is, in exchange for the immediate receipt of $ 1 billion, the government is ready to shoulder the debt burden of more than $ 11 billion over the term of the bond circulation.
So far, says Russ Dallen of the Venezuelan investment bank Caracas Capital, none of the investors agreed to buy these securities. "PDVSA bonds are toxic, but not as public. These latter are simply radioactive. As far as I know, no one has bought them, even 20%, "he said.
Attempts by the authorities to sell the securities at bargain prices just now make them wonder why they are doing this. After all, in June and July payments on government bonds and PDVSA with an aggregate nominal value of about $ 71 billion - the minimum this year (except January, see the chart).
Bloggers in the Caracas Chronicles suggest that the authorities are preparing to flee: this is "the last looting of the vault before jumping from a sinking ship." Dahlen of Caracas Capital, also publisher of the newspaper Latin American Herald Tribune, who first reported that Venezuela's failure to pay a debt broke a hole in Russia's 2017 budget of almost $ 1 billion, points out: although the initial default took place in September 2016, in March this Venezuela also missed the payment of Russia.
In 2011, at the request of Caracas, Russia provided a loan of $ 2.2 billion to supply arms for Venezuela. By September 2016, part of the debt was already overdue (Russia restructured with a deferred payment), and some were to be extinguished by September 30, 2016, and then - from March 31, 2017 to September 30, 2021 (see the cut-in ). The fact that Russia will not receive nearly $ 1 billion in 2017 due to Venezuela's failure to pay its debt has been confirmed by the Accounting Chamber in a few days.
In addition, the PDVSA is linked by debt with Rosneft: collateral for a loan of Venezuelan company for $ 1.5 billion is 49.9% stake in Citgo, its refinery in the United States. Other 50.1% of shares were used as collateral for the restructuring of Citgo's bonds last October. It is not known whether Rosneft took part in that restructuring or whether it subsequently bought new bonds on the market to increase its potential requirements for Citgo to a controlling stake.
"Rosneft" issued Venezuelan PDVSA $ 1.5 billion in advances
Rosneft in 2016 issued a Venezuelan state company PDVSA advances of about $ 1.5 billion on a contract for the supply of oil, according to the company's IFRS report.
"In May 2016, the company issued an advance of $ 500 million (32 billion rubles at the official rate of the Central Bank on the date of transfer of the advance) under the contract with PDVSA for the supply of oil. In November 2016, the company issued two advances to PDVSA for $ 500 million and $ 205 million (32 billion and 13 billion rubles, respectively, at the official exchange rate of the Central Bank at the date of transfer of advances), "the document says.
In addition, in December 2016, Rosneft issued another advance to PDVSA for $ 280 million (18 billion rubles at the official exchange rate of the Central Bank on the date of transfer of the advance).
A year ago, PDVSA reported that Rosneft wants to invest $ 500 million in projects in the Orinoco oil basin in Venezuela and to buy 23.33% in the Petromonagas JV, then the Russian company had 16.7%, while the PDVSA had 83.3% . Already this year, the National Assembly of Venezuela blocked the deal, Rosneft said that it considers it completely legal.
In Venezuela, Rosneft and PDVSA have several oil production projects. In addition to Petromonagas, it is JV Petromiranda and Petrovictoria, as well as Boqueron (60% for PDVSA, 26.67% for Rosneft, 13.33% for Austrian OMV) and Petroperija (for PDVSA - 60%, for Rosneft - 40%).
In February, Reuters wrote that the PDVSA is delaying the supply of oil and fuel to the Chinese CNPC and Rosneft. As of the end of January, the Venezuelan company has delayed for 10 months with the supply of 10 million barrels of fuel and 3.2 million barrels of crude oil for a total of about $ 750 million. Among the causes of supply disruptions are the shortage of storage facilities, the unpreparedness of tankers and disputes with suppliers.