Bondholders faced a Monday deadline on whether to accept a $5.3bn bond swap offer from Venezuela’s state-owned oil company PDVSA, which is struggling to persuade investors to participate.
Venezuela is offering to exchange bonds coming due in April 2017 and November 2017 for new notes that mature in 2020. The new securities carry an 8.5% coupon and offer amortizing annual payments through 2020.
But the cash-strapped company, which first announced the swap last month, has been forced to extend the deadline twice as the proposal failed to garner sufficient investor interest.
PDVSA is hoping holders of at least 50% of the bonds due next year will take part in the deal. In announcing a deadline extension earlier this month, PDVSA said “substantially less than 50%” of the bonds had been tendered.
Martin Schubert, CEO of European InterAmerican Finance, said that investor participation “was still uncertain” as of Monday.
“I believe if they get anywhere north of 40%, PDVSA will take it,” he said. “I would be very surprised if they postponed it again because it would send a very bad signal.”
Investors have been deeply concerned about PDVSA’s finances. Grappling with falling output and a drop in oil prices, the company is facing $15bn in debt maturities by the end of 2017, at a time when Venezuela’s currency reserves stand at around $12bn. Both PDVSA and Venezuela owe some $4.8bn to creditors by the end of this year.
Schubert said with investor participation of around 40% to 50%, PDVSA would win some breathing room to make its 2016 debt payments and another coming due in April 2017.
PDSVA initially offered $1,000 for every $1,000 tendered but it eventually revised the swap to offer bondholders $1,170 in new 2020 notes for every $1,000 in April 2017s and $1,220 in 2020s for every November 2017Ns.
The swap has been hit with legal issues. PDVSA said the new 2020 bonds would be backed by a 50.1% stake in its US-based oil refining unit Citgo.
However, last week US oil producer ConocoPhillips sued PDVSA, saying the use of Citgo shares as collateral is fraudulent and part of an effort by PDVSA to prevent the company from claiming compensation for assets that were nationalized by Venezuela almost a decade ago.