Venezuelan Officials, Bondholders Set to Meet in Restructuring Talks

By Anatoly Kurmanaev Features Dow Jones Newswires

Venezuelan officials are scheduled to meet with bondholders at the presidential palace Monday afternoon in an attempt to start the restructuring of up to $150 billion of external debt as the country's cash-strapped government teeters on default.

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The hastily convened meeting comes on the government's deadline to pay almost $300 million of late-interest payments, or risk putting the state-oil company, the lifeblood of its economy, in default. Last week, the government failed to make payment on time for a small bond issued by a state electrical company.

Most major investment funds are skipping the Monday meeting with President Nicolás Maduro's restructuring commission, which includes two officials blacklisted by the U.S. for alleged drug trafficking and corruption. None of the commission members have an economics or finance background.

On his weekly television show Sunday, Mr. Maduro said 414 investors had confirmed their participation for the meeting, which he said accounted for more than 90% of the country's creditors.

"Venezuela will never get to a default," Mr. Maduro said.

But most investors said last week that they had been put off by the legal risk of dealing with sanctioned officials. Others said they are staying home because they see little chance of a deal with a government that has spent years blaming Wall Street for its woes.

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"We don't think these people have the financial sophistication to make a meeting like this constructive," said one fund manager, who chose not to attend.

Any restructuring deal is hampered by the U.S. Treasury's ban on American financial institutions dealing with any new Venezuelan debt. Last week, however, the Treasury said it would consider making an exception for any new securities issued by the Venezuelan government to restructure its debt, as long as the plan is approved by the opposition-controlled congress.

Write to Anatoly Kurmanaev at Anatoly.kurmanaev@wsj.com

CARACAS -- Scores of international creditors flew in to this crime-ridden capital for a meeting on Monday with Venezuela's government to discuss how the country might avoid a messy default on more than $60 billion in bonds.

They walked away with precious few details and a box of chocolates.

Several investors who attended the hastily arranged meeting at the Presidential Palace in Caracas said they were treated to a half-hour monologue expounding the country's valiant efforts to keep paying from Venezuela's Vice President Tareck El Aissami, who is blacklisted by the U.S. for alleged drug trafficking.

Mr. El Aissami's speech over, investors were given boxes of Venezuelan chocolates and escorted out of the building, according to two participants in the meeting.

"They didn't even allow questions," said one investor after leaving the meeting. "They gave no details on their plans and no future meeting dates."

In a statement issued Monday night, the government called the meeting "highly promising" and said it served to begin the process of refinancing the country's debt. The statement offered no details on how and when the refinancing would take place. In the meantime, Venezuela would continue servicing its debt, the statement said.

The meeting came amid growing concern Venezuela is careening toward a full-blown default on its debt, which includes some $60 billion in bonds but could tally up to $150 billion in total obligations if other debts are added in, making it the biggest default in history.

The cash-strapped country, which is enduring its biggest economic decline since independence, has said it will continue paying its debts, but it has also said it wants to restructure, raising doubts about both its willingness and ability to pay.

The meeting came the same day as a deadline to pay almost $300 million of late-interest payments on several bonds, including several sovereign bonds and one from state oil firm Petroleos de Venezuela SA.

Last week, the government failed to make payment on time for a small bond issued by a state electrical company.

Separately, the International Swaps and Derivatives Association decided to reconvene Tuesday on a decision about whether investors in the credit default swap market should be paid after Venezuela's state oil company was late in making a payment for a maturing bond due Nov. 2.

Most major investment funds skipped the Monday meeting with President Nicolás Maduro's restructuring commission. Some said they were concerned with the sanctions against Mr. El Aissami -- sanctions which make it illegal to conduct business with him. Others said that the meeting would be a waste of time.

Mr. El Aissami read a statement about how U.S. sanctions had made it difficult for the government to pay its debts on time, without clarifying whether it would continue to make payments going forward, according to the people who said they attended.

"He said that this is all part of an initiative by the U.S. to overthrow the government," one attendee said.

The Venezuelan government and its state oil company have hired two prominent U.S.-based restructuring firms in the lead up to a stated plan to restructure approximately $150 billion in debt.

The government has retained Arnold & Porter Kaye Scholer, based in Washington D.C., and Petróleos de Venezuela SA has retained Hogan Lovells, a large global law firm that has advised PdVSA on other matters in U.S. courts, according to Venezuelan officials and a person familiar with the hires.

Both firms would not comment on the hires.

On his weekly television show Sunday, Mr. Maduro said 414 investors had confirmed their participation for the meeting, which he said accounted for more than 90% of the country's creditors.

"Venezuela will never get to a default," Mr. Maduro said.

Any restructuring deal is hampered by the U.S. Treasury's ban on American financial institutions dealing with any new Venezuelan debt. Last week, however, the Treasury said it would consider making an exception for any new securities issued by the Venezuelan government to restructure its debt, as long as the plan is approved by the opposition-controlled congress. A spokesperson for the U.S. Treasury didn't immediately respond to a request for comment Monday.

Write to Anatoly Kurmanaev at Anatoly.kurmanaev@wsj.com and Julie Wernau at Julie.Wernau@wsj.com

(END) Dow Jones Newswires

November 13, 2017 20:41 ET (01:41 GMT)