Maduro Regime Wins Order to Return €1.4 Billion to Venezuela

Ruling orders Novo Banco to reimburse funds to nine entities
State oil company PDVSA, Bandes bank among the beneficiaries

Pedestrians pass an illuminated Novo Banco SA logo above a building in Lisbon, PortugalPhotographer: Thomas Meyer/Bloomberg

In a statement earlier today, Novo Banco said the court’s decision “was expected” and that the bank had already transferred all Venezuelan state related funds into an account belonging to the Portuguese courts. The lender did not say if and when it would transfer the funds. A spokesman for Novo Banco said the bank was analyzing the court ruling with its lawyers.

When Guaidó failed to achieve his goal of ousting Maduro, many allies had second thoughts. Portugal sent an Ambassador back to Caracas last year.

The Maduro government has made great efforts to recover its overseas assets, including going to court in the UK to recover roughly $2 billion in gold stored in the Bank of England. London has also stopped recognizing Guaidó as Venezuela’s legitimate leader. The case is ongoing.

READ: Venezuela’s $2 Billion UK Gold Case Sent Back to Lower Court

It’s still unclear whether the Venezuela opposition will appeal the ruling, or whether Maduro will be able to access the funds given the US sanctions regime.

This is “a judicial victory that allows us to set a precedent for the legal fight Venezuela has against sanctions and blockade,” William Castillo, a Maduro official in charge of fighting international sanctions, said on state TV. The transfer of the funds could be delayed because Bandes is sanctioned, he said.

The money held by Novo Banco represents about 30% of Venezuela’s international reserves, excluding special drawing rights with the International Monetary Fund which the country can’t currently access.

— With assistance by Henrique Almeida

(Updates starting with Novo Banco statement starting in the 4th paragraph

Venezuela Oil Bond Rallies 160% as Investors Eye Citgo Sale

Investors bet auction of parent company will pay a PDVSA note
Broker EMFI says bond is undervalued even after massive gains

Signage is displayed at a Petroleos de Venezuela SA (PDVSA) facility in CaracasPhotographer: Carlos Becerra/Bloomberg

The reason: When it sold the debt, Venezuela’s government offered a 50.1% stake in the parent company of its US-based refiner Citgo Petroleum Corp. as collateral. Now, after a prolonged legal battle, a US judge has set a date to begin the process to auction off Citgo’s holding company. And holders of the bonds are atop the list of creditors set to be paid.

It’s a potential victory for big investors like London-based Ashmore Group Plc and a rare bright spot in the market for Venezuela debt after President Nicolas Maduro stopped payment on government and PDVSA bonds amid one of the world’s worst economic crises and crumbling relations with Washington.

The US doesn’t formally recognize Maduro and the country remains under sanctions that prohibit US firms from buying Venezuelan debt. That uncertainty helps explain why other PDVSA bonds trade for as little as 6 cents on the dollar.

However, there are growing signs of a thaw in relations between the Biden administration and Caracas, with the sides holding talks to explore temporarily lifting sanctions to encourage Venezuela to hold competitive presidential elections next year.

Lee Robinson, chief investment officer of the Altana Credit Opportunities Fund, which bought the notes after launching the fund in 2020, estimates prices of the bond would jump above 80 cents on the dollar if US holders could buy it.

“It’s the US sanctions that have driven the price down,” he said.

Francesco Marani, the head of trading at Madrid-based boutique investment firm Auriga Global Investors, agrees that an easing of sanctions would unleash a further rally. Auriga started buying the PDVSA 2020 bonds four years ago.

Not long after, as major Wall Street banks began dumping the debt, the prices fell to a low of around 10 cents on the dollar. Marani said that if the legal case proceeds as expected, the bonds will be paid out around par.

“The market is distorted by the trading ban,” he said. “The bond will continue to gradually trade higher.”

The bond fell into default in late 2019, less than a year before it matured. Bondholders are demanding about $1.9 billion in principal and interest due plus other fees, according to court documents.

Ashmore, which specializes in emerging-market investments, holds nearly 50% of the issuance, according to data compiled by Bloomberg. A representative from the company didn’t reply to questions seeking comment.

Creditors ranging from bondholders to a Canadian gold miner to oil company ConocoPhillips for years have been trying to force US courts to order an auction of Citgo’s holding company, PDV Holding. That sale has been largely held up because the Biden administration has protected the asset as part of its strategy to prop up Venezuela’s opposition.

But now the judge in the case, Leonard Stark, has set an Oct. 23 date to start the process that will ultimately end up with the auction of PDV Holding. The tentative sale hearing date is July 15, 2024.

The market expects that the bond will get settled some time next year. Issued in 2016 as part of a debt exchange, the note is backed by shares in a subsidiary of PDV Holding that owns the group’s single asset: Citgo —a group of three refineries and a network of gas stations. So, even if creditors take over PDV Holding, they would still have an obligation to the bondholders.

With strong recent earnings reports from Citgo, the auction could fetch more than $13 billion, according to estimates from EMFI Securities, which has said the bond is undervalued even after its recent run-up.

“The PDVSA 20 bond will most likely get par or close to par,” said EMFI’s senior strategist Guillermo Guerrero. “This can happen either because they eventually take over the collateral or because they get paid off by whomever buys PDV Holding.”

The Venezuelan opposition — which is recognized by the US and therefore controls Citgo — is attempting to challenge the validity of the bond in New York state’s top court. That process, which is still unfolding, is adding to constraints on the bond’s price, said Jaimin Patel, senior credit analyst at Bloomberg Intelligence.

“If those uncertainties ease, then further price increases are certainly feasible,” he said.

— With assistance by Maria Elena Vizcaino

(Updates with investor comment in 7th paragraph)

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rolfs venezuela restructurierungs blog

Donnerstag, 31. August 2023

Maduro Regime Wins Order to Return €1.4 Billion to Venezuela Ruling orders Novo Banco to reimburse funds to nine entities State oil company PDVSA, Bandes bank among the beneficiaries

Maduro Regime Wins Order to Return €1.4 Billion to Venezuela

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Venezuela Oil Bond Rallies 160% as Investors Eye Citgo Sale Investors bet auction of parent company will pay a PDVSA note Broker EMFI says bond is undervalued even after massive gains

Venezuela Oil Bond Rallies 160% as Investors Eye Citgo Sale

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