Petroleos de Venezuela Bonds Tumble on Payment Delay

Petró leos de Venezuela SA bond prices tumbled Tuesday after the cash-strapped national oil company missed coupon payments on its bonds.

On Tuesday, PdVSA bonds maturing in 2035 fell 4.7% to 44.3 cents on dollar of par value, down from 46.5 cents on Monday. The bond currently yields 22.7%. Bond prices fall when yields rise. The 2024 bonds traded 2.6% lower to 37 cents.

The company last week missed $404 million in coupon payments on its 2021, 2024 and 2035 bonds, according to banks and agencies handling the payments. That essentially left the company with a 30-day grace period to make the payments in order to avert default.

PdVSA said Monday night its payment of the $146.3 million coupon on the 2035 bonds, which was due on Thursday, is "in the process of execution, according to the time frame established by the terms and conditions of the issuance." PdVSA said it has already paid in a timely matter the coupons on the 2021 and 2024 notes.

"We read this to be use of the 30 day grace period," wrote analysts at J.P. Morgan Chase & Co. in Tuesday's note.

During a Monday interview, PdVSA President Eulogio Del Pino attributed the delays in coupon distributions to unforeseen issues between the PdVSA's correspondent bank and the bank's paying agent, which is Citibank.

Nonetheless, the delayed payments hit a nerve among investors because many are worried Venezuela, whose oil industry constitutes the lifeblood of its struggling economy, is on the verge of default. Cash position at PdVSA has deteriorated as a result of falling oil prices and its shrinking output.

Analysts still largely believe PdVSA will make the payments, citing Venezuela's reported $10.9 billion international reserves as of Nov. 17 and the company's recent efforts to reduce its cash drain by extending the term of some bonds using a debt swap.

Some analysts said there are inconsistencies between the company's statement and the actual coupon distributions. In a note published Tuesday by Bank of America Merrill Lynch, analysts said the paying agent has only received a partial payment on the 2024 notes, and payments on the 2021 and 2035 bonds were not made yet.

"The payments are coming in slowly; payments are being credited to investors slowly during the grace period," said Jane Brauer, a sovereign debt fixed-income strategist at Bank of America.

Last month, PdVSA swapped $2.8 billion of 2017 notes for debt maturing in 2020, after several rounds of extensions. The debt exchange provided some relief to the struggling oil company as it helped reduce its short-term cash squeeze.

Write to Carolyn Cui at [e-mail]

(END) Dow Jones Newswires

November 22, 2016 17:15 ET (22:15 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.