Petrobono 2011 operetta ends with a sleight of hand and a twist

July 6, 2009

(Este post se encuentra en Español aqui)

Let’s recap: The Petrobono 2011 was supposed to be for US$ 2 billion, but expanded to US$ 3 billion. It was supposed to trade only in Venezuela, but then PDVSA offered to register it abroad. It was supposed to be institutional, but then it was opened to individuals. The schedule was changed three times and it was issued under local law.

It’s purpose? To raise funds for PDVSA and help drive down the parallel swap market that was Bs. 6.45 at the time.

Finally, it closed last week and after this series of comical and amateurish steps, it was supposed to be assigned today.

No more surprises you think?


Because today PDVSA announced the results and the cut off price was 175% at Bs. 2.15 per US$ purchased and in a surprising sleight of hand, PDVSA placed less than the US$ 2 billion originally planned or less than half of the “increased” amount of US$ 3 billion.

Essentially, given all of the uncertainties still remaining on the issue, investors decided to play it very safe and place bids that would give them a low price in local currency for their foreign currency. But in the end, PDVSA raised less than it wanted and investors went through a lot of grief for nothing. PDVSA says there were bids for US$ 7.9 billion, which we find suspect, unless the Government’s own banks placed last minute bids.

But in the end this has just been an operetta, a comical display of sheer incompetence that achieved less than half of one of the two main goals of the placement. Because in the end, today the swap rate ended up above what it was when the bond was first announced (Even if rumors of its existence did play a role in keeping the rate down)

And to add insult to injury, there is the new twist tonight that PDVSA says that it is studying issuing “soon” the remainder of the failed issue at a price even higher of 181%.

Jeez, so the lucky ones that actually got the bond will live until the remainder is issued under the shadow of the possible arrival in the market of almost US$ 1.6 billion in additional bonds, which will do little to prop up the price of the bond once it is registered in the international markets.

What will they say tomorrow? That they will wait to register it in the international markets for the new issue? Truly nothing surprises us anymore in this mindless and incompetent revolution, so why not this too?

A bunch of high school students would have probably done a better job than these revolutionary “professionals” of not so high finance in placing, now and then, the new Petrobono 2011.

7 Responses to “Petrobono 2011 operetta ends with a sleight of hand and a twist”

  1. Tori Says:

    I’m really into it, thknas for this great stuff!

  2. […] Petrobono 2011 operetta ends with a sleight of hand and a twist […]

  3. Raimundo Andueza Says:

    Ojo Pelao, the “when and if” market is subject to documentation. If the documentation is lousy or the issuer takes very long to register the notes with Euroclear/Cleartream, then potential buyers can withdraw their offers from the when and if. On the other hand, an interesting feature of these notes is that the Issuer’s failure to pay them at matutity will trigger the Issuer’s other bond’s cross-default/cross acceleration provision. No covenants, no Eods, but failure to pay.

  4. Alex Dalmady Says:

    Miguel, we’re not all following this THAT closely. Is there an indication of where this bond will trade?

    If it trades around 70% (to yield 20%), those who bought at 175% (at 2.15) would end up getting their lechugitas at Bs. 5.375.
    Still not a bad deal, if they can flip the bond.

  5. Cecilio A. Alvarez B. Says:

    To be honest it does not surprise me at all.

    Assuming their goal would have been really to do an effective placement of Bonds, they would have engaged the syndicate of Banks to underwrite (if there are still banks out there that dare underwrite PDVSA risk) or syndicate the deal and used the funds to expand production, R&D or whatever.

    It just shows again and again that the homo(s) (sorry but the “sapiens” les queda grande) that talk about “documentologia” and “espionando” have and will have other interests at hand.

    For the ones that bought it and are on the hook now facing further fall in price, well that happens when you buy or do business with crooks and said risk should have been priced into the Bond they bought. So no complaining, sarna con gusto no pica…

  6. Roger Says:

    Imagine if all those who were lucky enough to buy those bonds got a letter from PdVSA…. Dear Investor: Welcome to the PdVSA famalia and now as a prefered PdVSA investor you can get the best insider trading deals in all of Latin America and all tax free because its deposited in an offshore bank nobody ever heard of. Plus first refusal on great deals like Argentine Banana and Coffee futures so secret that few outside the new PdVsa even know about them!…..
    Do you have any idea what a list of these suckers is worth?

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