Allocations Limit Supply of Venezuela’s New 2031

Venezuela’s new $4.2bn 11.95% 2031 may be large, but the immediate impact of so much supply may be limited thanks to how the bonds were allocated. The sovereign followed its standard formula of pricing beforehand and sold he paper among a captive group of local buyers, but according to Barclays, about $2bn-$2.5bn of the offering may have been placed in the public banking sector, which is likely sell the bonds through the government’s FX platform Sitme. The private sector, which typically sells such issues immediately into the secondary, saw smaller tickets and allocations. This may be negative news for the Venezuelan private sector, but should be supportive for Venezuelan assets overall, the shop notes. “[The fact that] the new 31s will not be sold aggressively by local holders leaves the market vulnerable to further upside price action,” said an investor. The deal was lead by Deutsche Bank and the Russian entity Evrofinance Mosnarbank, which is partly owned by Venezuelan development fund Fonden. “The idea is to try to bring Russian investors to buy in the secondary,” says a banker. The bond was priced at par and essentially amortizes equally in August 2029, 2030 and 2031. The RegS bond matures on August 5 2031.