A Venezuelan Debt to Equity Swap Opportunity   The first debt to equity swap since both Venezuela and PDVSA defaulted on the debt has been publicly announced two weeks ago. Non-US bondholders managed to exchange PDVSA and Venezuela bonds with a face value of $360.9m for PDVSA’s 49% stake in the Dominican refinery Refidomsa. Negotiations had started in March, the transaction was focused on PDVSA using its shares in Refidomsa to buy back a minimum portion of its bonds that were held by a Dominican company. The operation consisted of two stages: the first, which involved an exchange of Refidomsa shares in exchange for the bonds and the second in which the Dominican State bought from Dominican company the shares of PDVSA's recently acquired. The reported purchase price for the shares is €74m, equivalent to $87.5m, implying a 24.2 cents on the dollar recovery for the bonds. Currently sovereign bonds trade around 10% of face value while PDVSA bonds trade around 5% of face value. Negotiations took place between the Dominican company holding the bonds and the Maduro regime, the transaction was made in coordination with the Government of Venezuela, the Dominican company and the Government of the United States, specifically with the Office of Foreign Assets Control (“OFAC”), to avoid future related problems with any violation of the sanctions.  The implications of this transaction are enormous considering that OFAC was involved and can open the doors to very similar operations with bondholders. Furthermore the Maduro administration sees the swap it made two weeks ago as a possible model for future deals, indeed President Maduro is looking to attract private sector investment to boost the economy and hopes Venezuela's willingness to exchange state-owned assets for debt relief could attract investors to Venezuela. However there are several barriers to entry to engage in similar transactions: First this opportunity is only for non-U.S. investors as OFAC sanctions prevent U.S. investors to invest in Venezuela or PDVSA debt.  Secondly, to consider engaging in a similar debt to equity swap transaction a decent size of Venezuela and PDVSA debt is required, therefore a dedicated team is needed to source the very illiquid Venezuela/PDVSA debt at the current attractive prices. Last but not least, only a specialised team can identify, value the Venezuela/PDVSA assets and deal with OFAC sanctions.   Illiquidx Ltd acts as the adviser for the Canaima Global Opportunities Fund PCC (“Canaima”), a fund that allows non-U.S. investors to avoid all the barriers to entry mentioned above. Indeed, Canaima has the ability to engage in a similar debt to equity swap transaction to deliver significant returns to its investors. On the one hand Canaima is a sanction-compliant vehicle for non-U.S. investors and the Fund’s investment adviser can source a significant amount of Venezuela and PDVSA bonds despite the papers being very illiquid. On the other hand, the size of Canaima, which currently holds several hundred million dollars of Venezuela and PDVSA bonds, together with its specialized team, open up the possibility to negotiate a deal. Canaima has a specialised OFAC team able to deal with the sanctions issue, furthermore the Fund is working with Venezuelan specialists who have a deep knowledge of the sate-owned assets.   Canaima offers investors the opportunity to subscribe in cash or kind (if the investors hold bonds), hence investors can benefit from both an entry at attractive levels given the current low prices of Venezuela and PDVSA bonds and the high proceeds that a debt to equity swap transaction would deliver. If you want to know more about the Canaima Global Opportunities Fund feel free to contact us.