Venezuelan oil major’s debt swap: the beginning of the end?

Venezuela has defied the doomsayers, managing to stay current on its debts, even as the country slides into a deepening state of chaos. But its state oil company has now thrown in the towel — a move that will probably presage a wider, most likely messy default and debt restructuring. The head of Petróleos de Venezuela (PDVSA) last week unveiled plans to swap more than $7bn of bonds maturing next year with longer-dated debts due in 2020. To sweeten the deal for investors, PDVSA offered up its US subsidiary Citgo Petroleum as collateral. Venezuela hopes that a successful debt exchange will buy time, betting that oil prices will eventually recover and improve its finances. But lawyers question the legality of the proposed swap; S&P said it would constitute a default by PDVSA, and many analysts see the move as a curtainraiser for an inevitable restructuring of Venezuela’s national debts. More…