Venezuela’s state-owned oil company PDVSA has warned it might not be able to make its debt payments if enough investors do not accept a proposed $5.3bn debt swap.
The company pushed back a deadline late Monday for bondholders to exchange bonds due next year for longer-term securities, saying participation was “substantially less” than the 50% needed to complete the transaction.
PDVSA said it was extending the deadline for a third time and warned an unsuccessful swap may affect its ability to meet its debt obligations. The company set a new deadline for Friday.
“If the exchange offers are not successful, it could be more difficult for the company to make scheduled payments on its existing debt,” PDVSA said in a statement. “The company is evaluating all of its alternative options.”
The statement marked a shift in PDVSA’s public comments about the operation. When the company first launched the swap last month, PDVSA President Eulogio Del Pino said it was prepared make its debt payments even if bondholders rejected the swap proposal.
PDVSA officials held a conference call with bondholders on Tuesday, according to a person who participated in the call. PDVSA officials declined to say what its plans are if investor participation remains well below 50% after Friday’s deadline. PDVSA does not intend to increase the swap ratio, officials told bondholders, according to the person.
Investors have largely balked at the terms of the swap, which seeks to exchange bonds coming due in April 2017 and November 2017 for new notes that mature in 2020.
PDSVA initially offered $1,000 for every $1,000 tendered but 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 $1,000 in November 2017Ns. The new securities carry an 8.5% coupon with amortizing annual payments through 2020.
Falling production and a slump in oil prices have crimped PDVSA’s finances. The company has some $1bn in bonds coming due next week and along with Venezuela faces $15bn in debt maturities through the end of next year.
Legal issues have also loomed over the swap. PDVSA said the new 2020 bonds will be backed by a 50.1% stake in its US-based oil refining. Citgo. However, last week US oil producer ConocoPhillips sued PDVSA, arguing 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 a year ago.