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May 13 (Reuters) – Venezuela on Wednesday launched a restructuring of its sovereign debt and that of state oil firm PDVSA, lifting bond prices, as it seeks relief from what it called unsustainable obligations.
In a statement, the government said the “comprehensive and orderly” overhaul would cover both sovereign debt and that of PDVSA and aim for “substantial relief” from debt burdens.
The restructuring is intended to “put the economy at the service of the Venezuelan people” with any relief directed toward social welfare, inclusive growth and job creation, the statement said.
Venezuela said it expects to present its macroeconomic framework and public debt sustainability analysis to the international financial community next month, and has appointed Centerview Partners as financial adviser. The statement did not provide details on a restructuring timetable, creditor engagement, or the terms the country may seek.
The Venezuela Creditor Committee, a formal group of bondholders, did not immediately respond to a request for comment.
Venezuela is one of the world’s largest sovereign default cases, with the sovereign and PDVSA totaling about $60 billion in defaulted bonds outstanding. Analysts estimate total liabilities, including arbitration awards and accrued interest, could exceed $150 billion.
The South American oil exporter has missed payments on its external debt since 2017. In Wednesday’s statement, the government said Venezuela had previously demonstrated solvency and a willingness to meet its international obligations, but that its ability to pay was impeded from 2017 by financial sanctions.
“We welcome the Republic’s willingness to engage with bondholders and address its financing needs,” said Pramol Dhawan, head of PIMCO’s emerging markets portfolio management team.
“After nearly a decade in default, a formal restructuring process is an important step forward. Any durable resolution will need to be comprehensive and anchored by a credible macroeconomic framework to give creditors confidence in Venezuela’s capacity to service restructured obligations,” he said.
PDVSA bonds rose on the news, with the 2027 up nearly 2 cents to 41.125 cents on the dollar and the 2024 up 1.75 cents at 41.625.
“This development is broadly in line with our expectations,” said Shamaila Khan, head of fixed income for emerging markets and Asia Pacific at UBS. “Macro and policy fundamentals have been improving, and we have long viewed a sovereign and PDVSA restructuring as increasingly likely in the near term.”
Last week, the U.S. Treasury issued a license for firms to aid in a potential Venezuelan debt restructuring, though further actions would be needed for the overhaul to be carried out.
Reporting by Reuters, Editing by Natalia Siniawski and Sanjeev Miglani
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