Published: Sat, November 18, 2017
Global News | By Stacy Ballard

Venezuela's state oil firm PDVSA declared in default

Venezuela's state oil firm PDVSA declared in default

The country is seeking to restructure its foreign debts, estimated at around US$150 billion, after it was hit hard by tumbling oil prices and American sanctions. "This deal strengthens the relations between our two countries", added Wilmar Castro, who serves as Venezuela's vice president for the economy.

"The debt relief provided to the republic from the restructuring of its liabilities will allow funds to be allocated for the country's economic development, to improve the debtor's solvency and increase the chances of all creditors to recoup loans granted earlier to Venezuela", the Russian ministry said.

"We would very likely consider any Venezuelan restructuring to be a distressed debt exchange and equivalent to default given the highly constrained external liquidity", S&P said.

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Venezuela's delayed payments on sovereign debt and bonds issued by state oil company PDVSA constitute a "credit event", triggering payouts on credit default swaps (CDS), a NY derivatives group has ruled.

The Venezuelan government condemned S&P Global Ratings' Tuesday "attack" over its decision to partially place in default Venezuela's debt load after the country missed interest payments for global bonds due in 2019 and 2024, within the 30-calendar-day grace period.

For several weeks now, Venezuela has been taking advantage of the "grace periods" for late payments on its bonds as the stricken country tries to stay current on its obligations. Caracas has only $9.7 billion (€8.2 billion) in foreign reserves and needs to pay back at least $1.47 billion in interest on various bonds by the end of the year, and another $8 billion in 2018.

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Participants at the meeting told AFP that officials said the government meant to form working groups to evaluate short- and mid-term debt renegotiation proposals, but gave no specifics.

In response to the downgrading by ratings agencies, Communications Minister Jorge Rodriguez said Venezuela was already catching up on the payments.

PDVSA also said it has made the interest payment on its 2027 bond and has "successfully completed" capital payments on the 2020 and 2017N bonds.

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They were to reconvene Thursday to determine whether holders of PDVSA debt with default insurance - known as credit default swaps - can collect payment.

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