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Venezuela Bond Bull Says Sanctions May Keep Maduro Paying

11 de septiembre de 2017 13:34
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One of the largest holders of Venezuelan bonds says U.S. sanctions are giving Nicolas Maduro’s government greater incentive to pay its debts.

The penalties imposed late last month restrict the country’s ability to restructure its obligations, meaning the president’s only option is to keep scraping up enough cash to keep current on overseas notes. Maduro will put off default as long as possible because it would be catastrophic for the oil industry and ultimately lead to a government collapse, according to Bent Lystbaek, who oversees $3.4 billion in emerging-market debt at Danske Capital.

“The willingness to pay is extremely high and now they have further impetus to keep the boat afloat,” Lystbaek said from Lyngby, Denmark. "Default would be the death sentence of Maduro’s administration."

Lystbaek isn’t alone in his thinking. While Venezuelan bond prices dropped in the days after sanctions were announced, they’ve since mostly recovered on the view that Maduro has tremendous incentive to keep investors happy if he wants to stay in office. While the U.S. crackdown led Fitch Ratings to cut the country deeper into junk territory, Venezuela’s default odds have actually dropped. The implied probability over the next 12 months declined to 61 percent from 65 percent a month ago, according to credit-default swaps data compiled by Bloomberg.

Danske Capital is the 19th-largest holder of Venezuelan bonds and 21st-largest holder of PDVSA debt as of June 30, according to data compiled by Bloomberg.

Venezuela’s benchmark dollar bonds due in 2027 rallied to a two-week high of 40.12 cents on the dollar as of 9:30 a.m. in New York.


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