Venezuela's Debt Soars as US Pressure on Maduro Reaches a Boiling Point
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Citi analysts predict a significant boost in Venezuela's bond value if US pressure on President Nicolas Maduro leads to a historic debt restructuring. The estimated debt of $170 billion, including $60 billion owed by state oil company PDVSA, could see a 30-60% increase in value, making bonds worth 40-60 cents on the dollar. The rally in Venezuelan credit began earlier this year with US military strikes and a $50 million reward for information leading to Maduro's arrest. Citi believes that a regime change could pave the way for a long-awaited debt restructuring, which would involve a 50% write-off of the debt to make it economically sustainable. The bank's analysts suggest that Venezuela could offer investors a 20-year bond with a 4.4% coupon and a 10-year zero-coupon bond to cover past due interest payments. This package would be worth around 46 cents on the dollar. An additional 'value recovery instrument' linked to oil sales could further increase the recovery value to the high-40s. A 50% write-down would bring the country's post-restructuring stock to around $85 billion, with a $3.75 billion annual payment capacity, translating to a coupon of approximately 4.4%. This provides a starting point for future negotiation parameters, according to Citi.
