(Repeats without change)
By Brian Ellsworth, Tracy Rucinski and Sujata Rao
Nov 21 (Reuters) - Holders of Venezuelan bonds are meeting
with each other and considering forming committees, advisers and
fund managers told Reuters, as questions mount about the
feasibility of President Nicolas Maduro's proposal to
restructure $60 billion of debt.
Maduro has said the country will keep servicing its
obligations for now. But bondholders ranging from longstanding
investment funds to hedge funds and emerging markets funds in
the United States and elsewhere are starting to lay the
foundations for a potentially bitter and messy battle over a
possible default down the road.
A UK-based hedge fund, MacroSynergy Partners, has invited
institutional holders of Venezuelan and state-owned oil company
PDVSA debt to a Nov. 30 meeting in London to discuss
the likely path forward and the next steps for creditors,
according to an invitation seen by Reuters.
Participants will also discuss whether to create an
informal, ad hoc bondholder committee, the invitation said.
While Venezuela has kept current on its bond payments, it
has paid some coupons late, leading ratings agencies to declare
a selective default and keeping creditors guessing. Another $237
million in interest payments were due on Tuesday but market
sources said there was no sign of the funds hitting their
Venezuela failed to make those payments within the grace
period, credit rating agency Standard & Poor's said late on
Tuesday, announcing it was downgrading the ratings on
Venezuela’s global bonds due 2025 and 2026 to ‘D’ from ‘CC.’
In the United States, Millstein & Co's head of sovereign
advisory Mark Walker said he had met with an initial group of
more than 20 creditors regarding the formation of a possible
committee. He declined to name the creditors, citing
Bank industry group the Institute of International Finance
has also been looking at forming a creditors' committee, two
sources familiar with the matter told Reuters.
It was unclear how many groups would ultimately form.
Creditors have also been organizing conference calls, and
holding improvised meetings in Caracas hotels, investors have
For any restructuring to work, advisers and fund managers
said two main conditions need to be met: the removal of U.S.
sanctions on Venezuela that block U.S. banks from acquiring
newly issued Venezuelan debt, and a commitment by Maduro to
Neither is likely to be met any time soon.
Many in Venezuela's once-prosperous economy are suffering
from food shortages and preventable disease against a backdrop
of steep inflation triggered by years of government
mismanagement. The government blames a fall in oil prices and a
U.S.-led "economic war" for Venezuela's financial mess.
"You can't have a viable restructuring without a credible
economic plan and a government with the commitment and
competence to execute it," said Walker, who advised on Greece's
restructuring while working at Lazard.
"If creditors are asked to take a hit now, they need to have
reason to believe that they will be better off in the future,"
But Maduro's socialist government has consolidated power
this year, creating a new rubber stamp constituent assembly, and
has shown little interest in economic reform.
That lack of flexibility is likely if anything to lead to
still tougher sanctions by the administration of U.S. President
Donald Trump, who has described Maduro as a "bad leader who
dreams of becoming a dictator."
Venezuela's Information Ministry and PDVSA did not respond
to a request for comment.
Also key to any restructuring is the willingness of groups
beyond the bondholders to spread the financial burden, advisers
Venezuela's $60 billion in bonds is estimated to be only a
third of the country's total debt, with the rest in the hands of
Russia and China.
Russia last week agreed a debt restructuring deal with
Venezuela, while China voiced confidence in the government's
handling of the debt issue.
(Reporting by Brian Ellsworth in Caracas, Tracy Rucinski in
Chicago and Sujata Rao in London,; additional reporting by Marc
Jones in London, Dion Rabouin and Dan Bases in New York and Tom
Hals in Wilmington, Delaware, Editing by Rosalba O'Brien)
First Published: 2017-11-22 01:52:30
Updated 2017-11-22 13:01:01
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