Venezuela Seen Heading toward New Issuance

Venezuela’s Central Bank is scheduled to complete the auction today of $330m in previously issued PdVSA 2035 dollar-denominated bonds through the SICAD currency exchange system, and the use of bonds suggests a government pragmatism that could mean new issuance ahead. With the government pressured by stagflation and other difficulties this year, many analysts had been predicting such a shift since the election of President Nicolas Maduro in April. Jefferies says it is a “fair assumption that officials will deplete the $1.7bn stock of PdVSA’35 and then shift towards new issuance.” If officials plan to hold $300m-plus bi-weekly auctions, then the shop sees new issuance as soon as three months from now. Also, this week’s $330m amount represented an increase from $200m. “After opening this door, the government makes it possible that future issuances (by PdVSA, since the republic cannot legally sell the bonds to BCV) might be used to provide hard currency to the private sector through SICAD rather than issuing directly in the international market,” Barclays says. PdVSA has not issued in the broader markets since May of last year, when it sold $3bn in the 9.75% 2035 bonds via Citi, according to Dealogic data. The Venezuela sovereign has not conducted a sale since a $3bn 11.75% 2026 deal through Credit Suisse, in 2011.