Wed, Nov 15, 2017 - Page 7 News List

No firm offers for Venezuela’s creditors

SHORT AND CONFUSING:Venezuelans are suffering malnutrition and preventable disease because of triple-digit inflation, while its bondholders are given chocolates

Reuters, CARACAS

Venezuela’s socialist government on Monday gifted chocolates to creditors, but offered no firm proposals at a brief meeting in Caracas that left investors without a clear understanding of the government’s strategy to renegotiate US$60 billion in debt.

Venezuelan President Nicolas Maduro this month confused investors with a vow to continue paying the nation’s crippling debt, while also seeking to restructure and refinance it.

However, restructuring and refinancing appear out of the question due to US sanctions against the crisis-stricken nation.

A default would compound Venezuela’s dire economic crisis.

Monday’s short and confused meeting, attended by senior Venezuelan officials blacklisted by the US, gave no clarity on how Maduro would carry out his plan, bondholders and their representatives who participated said afterward.

That means Venezuela remains with the dilemma of whether to continuing paying debt at the expense of an increasingly hungry and sick population, or defaulting on creditors and burning its bridges to the global financial system.

“There was no offer, no terms, no strategy, nothing,” said one bondholder, leaving the meeting that lasted a little over half an hour at the White Palace, departing with a colorful gift-bag containing Venezuelan chocolates and coffee.

However, bond prices maintained last week’s rally, with one investor saying there was relief the meeting did not include a default announcement.

About US$300 million in late interest payments on three bonds — PDVSA 2027, Venezuela 2019 and Venezuela 2024 — was also due on Monday after 30-day grace periods ended.

However, bondholders appeared unconcerned at the delay, which was due in part to increased bank vigilance of Venezuela transactions.

“My expectation is that the coupon payments will come through as well,” Ashmore Investment Management research head Jan Dehn said. “We know that these delays exist and why they exist.”

About 100 investors, including some bondholders from New York and lawyers representing creditors, entered the White Palace via a red carpet and were greeted by a poster of Maduro’s predecessor Hugo Chavez at the entrance of the meeting room inside.

Chief debt negotiators Venezuelan Vice President Tareck El Aissami and Venezuelan Minister of the Economy Simon Zerpa — on US sanctions lists for drug and corruption charges respectively — attended the meeting for half an hour.

They met with some bondholders, while others stayed out of the room on concerns about penalties for dealing with officials sanctioned by Washington.

El Aissami told creditors that Deutsche Bank might soon cut off some financial services to Venezuela, participants said.

Deutsche declined to comment.

He read a statement protesting unfair treatment by global financial institutions, including US President Donald Trump’s sanctions aimed at preventing Venezuela from issuing new debt.

“Now Maduro can say: ‘I showed goodwill, the bondholders showed goodwill ... but unfortunately because Uncle Sam is not playing ball we can’t [refinance],” said Dehn, who did not attend the meeting. “I’m not hugely surprised nothing’s come out of that meeting.”

Separately, the EU approved economic sanctions and an arms embargo on Venezuela on Monday, although it has yet to name who will be subject to the sanctions.

Markets continue to remain optimistic that Venezuela would service its debts, noting it has made close to US$2 billion in payments in the past two weeks, albeit delayed.

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