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Venezuela Bankrupt? Caracas Fails To Make Sept 15 Interest Payment

Venezuela Bankrupt? Caracas Fails To Make Sept 15 Interest Payment

Exactly one week ago, we wrote that a “Venezuelan default is only a matter of time”.  We said that “while debt servicing has been a government priority, declining external liquidity and a deteriorating domestic situation (three-digit hyperinflation, shortages, and a political crisis between the government and the National Assembly) make it a daunting task. By 2020, the country must repay 30% of the external debt due to expire in the next 23 years.”

Among other things we warned that “default seems inevitable in the medium term due to the prolonged period of low oil prices and increased US sanctions. President Trump’s executive order of August 24, 2017, strengthened sanctions against PDVSA by prohibiting all transactions related to new debt with a maturity greater than 90 days and by forbidding Citgo from repatriating dividends in Venezuela.”

Well, the default may have come in far sooner than even we expected as moments ago Bloomberg reported that according to sources, intermediaries tasked with processing Venezuela’s $185 million interest payment due Sept. 15 haven’t received the cash to do so.

It adds that “several holders of bonds due in 2027 haven’t received a payment”, and that an “official at the public credit office in Caracas declined to comment on whether the funds have been transferred or when investors will receive them.”

Further suggesting that Venezuela may have indeed entered its 30 day grace period, the country’s National Office of Public Credit hasn’t made any public statements about transferring funds for the coupon. In the past, Bloomberg notes that the office has used its Twitter account to alert the market when the bond’s fiscal agent has been paid.

For now the bond market appears to not have noticed with Venezuela bond issues still trading at respectable levels.

…click on the above link to read the rest of the article…

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