Creditors calling themselves the Venezuela Creditors Committee, which together hold around $8bn of sovereign and PDVSA bonds and are represented by US firm Millstein & Co, said on Monday that they would only support a restructuring if creditors were treated equally.
The committee wants to ensure “fair treatment of all creditors of equal rank” by seeking a consensus among creditors, which it hopes should minimise the costs of legal action. Venezuela and PDVSA have been in default since November.
Despite this plea for equal treatment, Venezuelan sovereign bonds have been outperforming PDVSA bonds on the basis that recovery values might be higher. According to one trader, Venezuela sovereign bond prices — with the exception of those maturing this year — are between 20%-35% higher year to date. PDVSA prices are 5%-10% down, said the trader.
Venezuela’s 12.75% bonds maturing in August 2022 are bid at a cash price of 28.345, while PDVSA’s bonds with the same coupon and maturing in February 2022 are bid at 24.35.
“We attribute the outperformance of the sovereign to more favourable technicals for the higher coupons, as well as the increasing demand from litigant based investors,” said Siobhan Morden, head of Latin America strategy at Nomura.
There is speculation that bondholder groups have already organised for Venezuela’s 2034s, said Morden.
The Nomura analyst sees this as a buying opportunity, with PDVSA bond prices nearing lows, and said the oil company’s bonds looked “perversely” more attractive than the sovereign.
“Recent underperformance of the PDVSA bonds offers favourable risk/reward on asymmetric risks to any positive headlines,” said Morden.
Yet for some investors, any restructuring is likely to remain theoretical for a long time yet.
“Even if they did organise and the US consequently ramped up even more sanctions, I don’t see things changing in the short term,” said the EM research head at one institutional investor. “At most Maduro might be replaced by someone else within chavismo.
“Governments have survived worse sanctions than what Venezuela faces.”
Furthermore, the existing government is unlikely to be able to implement economic policy that would make a restructuring sustainable, and it is not clear that bondholders can negotiate with Venezuelan officials.