Ten days ago, S&P cut Venezuela’s debt rating to selective default over a missing debt payment on the so called oil warrants issued in 1990 with the PAR and DCB bonds, as reported here in this blog. The Government apparently was taken by surprise by the downgrade as nobody seemed to remember that it had to be made. Some blamed the new Minister of Finance, but in reality, the payment was due October 31st. way before Minister Merentes took the position. Despite this, Merentes blamed PDVSA, saying the company had not been able to provide the data required in order to calculate what the amount of the payment should be.
At the time, the Government said that S&P rushed to downgrade the country and that Venezuela was ready to pay the roughly US$ 30 million due and would create a trust at the payment agency with that amount until it had calculated how much money needed to be paid for each warrant. It also said it would pay interest on the money owed when paid.
Well, today the Government said that its preliminary calculation indicates that no payment needs to be made. According to the Ministry of Finance, no payment needs to be made because the average price of the Venezuelan oil basket for the period was below that of the reference price established by the original prospectus of the Brady bonds. The Government claims that S&P and others made the mistake of using the average price of the Venezuelan oil basket without subtracting shipping and insurance from it. Others say that S&P is right and the Government does owe the money.
In the end, this is simply creating unnecessary confusion in the country’s debt markets and projecting an image of disorganization that is not good for the country. Until the issue is cleared up, it will likely block the country from tapping international markets. The 2005 budget includes issuing debt in US currency and euros.
The Devil's Excrement 
Leave a comment