PDVSA 2017s fall on disappointing debt swap terms
By Paul Kilby
NEW YORK, Sept 19 (IFR) - The 2017s issued by Venezuelan oil company PDVSA were about 1.5 points weaker Monday as investors largely shunned the terms of a debt exchange targeting US$7.1bn of those securities.
The 5.25% 2017s were spotted at 72.00-73.00 after starting the day down two points at around 71.50-72.50, while the 8.5% 2017s were at 77.00-78.00 after opening at 76.50-77.50.
If successful, the long-awaited liability management operation would give the beleaguered oil exporter some relief from a wall of maturities falling due over the coming months.
And while a good chunk of the 2017s are thought to be held by compliant government entities, PDVSA will likely need to bring in a critical mass of foreigners to get past the 50% participation rate set by the company.
"The swap looks like it would be more appealing to locals than foreign investors, given the 1:1 ratio in addition to the uncertainty over the value claims on Citgo," said Sean Newman, senior portfolio manager at Invesco.
PDVSA announced Friday that for each US$1,000 in principal of existing 2017s, bondholders would receive an equal amount of new 8.5% amortizing 2020s, backed by a first-priority interest on 50.1% of capital in Citgo Holdings.
After the early bird deadline of September 29, however, holders will receive US$950 of new notes for every US$1,000 of old securities exchanged.
That initial par for par offer disappointed many market participants who said a higher ratio would be required to make the transaction NPV-positive for holders. Continuación...