Venezuela bonds fall after PDVSA warns swap fail could compromise payments

martes 18 de octubre de 2016 10:39 GYT

By Alexandra Ulmer

CARACAS Oct 18 (Reuters) - Venezuela's bond prices fell on Tuesday after state oil producer PDVSA again extended a deadline for its $5.3 billion debt swap offer and warned that if the operation failed the cash-strapped company might struggle to pay its debt.

The swap offer was designed to ease operations at the company heaving under low oil prices, slumping production and an extreme cash flow deficit that has left it unable to pay contractors on time.

But low participation led PDVSA to sweeten the exchange's terms, extend deadlines and, on Monday night, warn that it "could be difficult" to pay bondholders if the operation flops.

The swap allows investors to exchange bonds maturing in 2017 for a new bond maturing in 2020 that is backed by shares in PDVSA's U.S. subsidiary, Citgo Holdings Inc.

The swap deadline was extended from Monday to Friday.

The cost of a default would be steep for PDVSA and the market largely sees its comments as an attempt to push participation to the 50 percent threshold.

"They're trying to scare the market," said one fund manager, adding he did not think the strategy would work. "They know the cost of not paying is much higher than the cost of paying."

President Nicolas Maduro has insisted Venezuela and PDVSA will make all debt payments and dismissed default talk as part of a politically motivated campaign against his socialist government.   Continuación...