By Paul KilbyNEW YORK, April 21 (IFR) - PDVSA's ability to cover a bulky
US$2.1bn amortization this month suggests a willingness to make
debt payments for the rest of the year and reveals how Venezuela
may be sourcing funds, according to a report from Siobhan
Morden, Nomura's head of Latin American fixed-income strategy.
Following are other highlights from the Nomura report:
* With the company presumably sourcing funds from oil export
proceeds, there is less cash flow stress and more efficient
management of US dollar liabilities. Nomura hence assumes that
debt repayment capacity remains a function of oil exports and
the price of crude.
* However, Nomura does not rule out the country resorting to
one-off funding operations. But such options come with latent
legal risks, as the administration of President Nicolas Maduro
tries to circumvent the opposition-controlled legislature to
* The president of the National Assembly sent a letter to
Deutsche Bank CEO John Cryan denouncing attempts to raise
funding through a gold exchange, according to a recent tweet.
* While such reputational risks may discourage banks from
carrying out such transactions, this would not stop the direct
monetization of US$7.2bn in gold holdings at the central bank -
as a last resort.
* Nomura assumes however that the government would only draw
on FX reserves as a last insurance policy during the final phase
of a liquidity crisis. This may explain why FX reserves continue
to hover above US$10bn.
* During the 1994 economic crisis, operational reserves fell
as low as US$1.7bn, suggesting that reserves could fall further
and that Venezuela will pay until they are unable to remain
current on their debt.
* The government will likely first exhaust other
alternatives such as the recent repurchase agreement for US$300m
on a US$1.3bn collateral of PDVSA 2022 bonds, as reported by
* Venezuela could possibly raise another US$1.5bn under
similar repo transactions, using US$1.7bn in outstanding 6%
PDVSA 2022s and US$5bn of sovereign 6.5% 2036, though the latter
security is deemed illegitimate by the opposition.
(Reporting by Paul Kilby; Editing by Marc Carnegie)
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