Venezuela's dollar bonds confuse the market

Author: Amélie Labbé | Published: 11 Jan 2017

Venezuela’s latest sovereign bond issuance has left the market perplexed, with investors unsure of the rationale behind this transaction.

Reports in the press point to $5 billion worth of 20-year bonds with a coupon of 6.5% - a far cry from the 20% normally commanded by investors buying debt from the troubled nation and from some of its state-run organisations, such as Petróleos de Venezuela (PDVSA). This issuance is also the first recorded sovereign deal in the Latin American country in over five years.

"The government bought debt from itself"

"The terms were clearly highly influenced by government, which has shown itself to be creative and resourceful when cash is needed," said Manuel Orozco, sovereign ratings’ analyst at Standard & Poor’s.

But, according to a legal source in Venezuela, the role of the government-backed Banco de Venezuela (BdV) is causing confusion.

BdV were the sole buyers of the...



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