Venezuela looks for short-term relief in Citgo debt sale
By Davide Scigliuzzo
NEW YORK, Jan 20 (IFR) - Dollar-starved Venezuela will use its US refining unit Citgo to sell US$2.5bn of new debt, as the OPEC country tries to fend off default worries amid a steep slide in crude oil prices.
With some US$10bn in debt payments due this year, the country hopes to be able to lock in cheap funding as it struggles to plug a widening financing gap.
A US$1.5bn high-yield bond and a US$1bn senior secured five-year term loan will be sold through Citgo, the US subsidiary of state-run oil company PDVSA, a source with direct knowledge of the deal told IFR on Tuesday.
A bank meeting for the loan tranche is scheduled for Thursday in New York, while a roadshow for the bond portion is expected to be announced as soon as next week, the same source said.
If successful, the deal could provide some support for the short end of Venezuela and PDVSA's bond curves, traders and investors said.
But the transaction could also scupper any plans to sell off the Citgo unit altogether, which the sovereign has been considering for some time.
"If they get it done, there will be US$2.5bn in liquidity going straight into PDVSA," said Marco Santamaria, a portfolio manager at AllianceBernstein.
"At the margin that is a good thing, particularly for short-term securities. But I think this also tells you that the equity sale is not on the table," he said. Continuación...