Venezuela’s Electricidad de Caracas — a state-owned electric company — has defaulted on a $650 million bond payment, Wilmington Trust said Friday.
The default comes as the International Swaps and Derivatives Association (ISDA) prepares to decide next Monday whether state-run oil giant Petroleos de Venezuela (PDVSA) experienced a credit event earlier this month.
PDVSA missed a $1.12 billion bond payment on Nov. 2. If ISDA decides that PDVSA did experience a credit event, that could lead bondholders to declare a default, which could trigger an avalanche.
“We expect if holders do declare a default then that could be used to trigger cross default across the whole US$28bn of PDVSA bonds,” Stuart Culverhouse, chief economist at Exotix Capital, said in a note. He noted, however, that bondholders “may simply give the government more time to make the payment, as the intention seems to be there, but coordinating a large group of holders with different incentives could prove challenging.”
President Nicolas Maduro erased any remnants of democracy in late July, stripping political opponents of power and establishing a new legislature filled with his cronies.
But Maduro’s cemented regime still faces the same problems it started years ago: An exodus of its educated class combined with mass shortages of food, medicine, money and — most importantly — time.
Shortages of basic medicine and proper medical equipment are common. More than 750 women died during or shortly after childbirth in 2016, a 66% increase from 2015, according to the Venezuelan health ministry.
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