His last debt paper was rated 5% higher in response on Thursday. Traders in the market continued to be terrified yesterday, after the country and state-owned oil company pegged PDVSA after promising to redeem previous debt securities.
On Friday, PDVSA announced that it had 'begun' to redeem $ 842 million on a bond that expires in 2020. Two investors claimed last week to have received a payment from PDVSA. Others still have not seen anything about their inlay.
The bond to be hedged today marks 5 cents below the dollar, indicating the market is not sure the money will actually be transferred.
This type of bond does not have a so-called 'grace period', the term in which the publisher gets more time to settle. According to market analysts, the consequence of non-redemption is enormous: creditors can ask the International Swaps and Derivatives Association to determine whether the group is bankrupt. That would trigger a series of credit default swaps with which investors have secured against default on their purchased bonds.
The credit default swaps are currently 75% probable that the PDVSA will go bankrupt within twelve months, and a 99% chance that Venezuela will no longer be able to pay in five years.
Because of the troubled state of the country's finances, which, according to the United Nations, is a humanitarian crisis among its population, compensation for new debt has risen to around 9% per annum.
Since the fall in oil prices in 2014, revenue for the treasury declined dramatically. The country would be bankrupt. Investors hope for every dollar that comes from Venezuela. This bond repayment is only the beginning: PDVSA had to repay another $ 1.2 billion bond this week.
Euroclear, who received the payments before distributing to bondholders, did not want to confirm that the money for the first bond was received in respect of the Financial Times. That newspaper signed Thursday big worries with merchants. The imbalanced way Venezuela treats its creditors would be the signal that it is undermining. Russia reported this week worth $ 1 billion in debt.