Approaching the Middle of the Beginning of the End in Venezuela
Though none of it is earth-shaking, there has been a lot of news out of Venezuela recently, so it seemed an appropriate time for an update. The election looms. Henri Falcón leads some polls, though those are presumably unreliable indicators, given what Reuters slyly labels Maduro’s “institutional advantages.” A Falcón victory would increase the odds of a restructuring in the near future. A Maduro win might prompt additional U.S. sanctions; the Wall Street Journal (here, also linked above) speculates that these might finally target oil exports.
Speaking of PDVSA and oil exports: We’ve discussed before the risk that creditors will seize assets related to oil exports, and also the fact that most well-managed firms adopt transaction structures that block such efforts. PDVSA is… not a well-managed firm. Bloomberg reports that it has done very little to protect oil-related assets. According to this CNBC report, Conoco Phillips--which recently won a $2 billion arbitration award against PDVSA--has asked a court in the Dutch Antilles for “control” of PDVSA facilities there, including oil storage facilities. Details are scarce at this point, and it’s not entirely clear to me what this means. I assume the merits have not been decided yet. But PDVSA seems to recognize the risk. Bloomberg (linked above) reports that the company is now trying to carry out “ship-to-ship transfers off the coat of Venezuela.”
One puzzling aspect of the Venezuelan crisis is that holders of bonds and promissory notes have largely been sitting on the sidelines. In a couple of earlier posts, Mitu and I speculated about why this might be. But perhaps this inaction is coming to an end. This lawsuit (filed May 5) seeks to recover roughly $25 million due under notes issued to SNC-Lavalin. Though for a relatively small amount, we will see whether this lawsuit prompts other creditors to enter the fray. Meanwhile, bondholders have begun to organize, though they may not have much to do until there is a government is in place that wants to talk restructuring.