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The Time Has Come: Venezuela May Be In Default In Under 48 Hours

searcher

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#1
The Time Has Come: Venezuela May Be In Default In Under 48 Hours


by Tyler Durden
Oct 25, 2017 10:33 PM


This past weekend, Venezuela failed to make $237 million in bond coupon payment, blaming "technical glitches" when in reality it simply did not have the money (or wish to part with it). Adding the $349 million in unpaid bond interest accumulated over the past month as of last Friday, that brings Caracas' unpaid bills to $586 million this month, just days before the nation must make a critical principal payment. And, as BofA sovereign debt analyst Jane Brauer writes, while the bank's base case assumption is that Venezuela will make its debt service payments this year, "the probability of a short term default has increased substantially with coupon delays" and it could come as soon as this Friday, when an $842 million PDVSA principal plus interest payment is due, and which unlike typical bond payments does not have a 30 day grace period but instead is followed by a second $1.1 billion PDVSA coupon on Nov 2, also without a 30 day grace period.

As Brauer writes, Venezuela has been in as similar situation of payment uncertainty in the recent past, with bond prices plummeting right before a big payment. For example, just before a big principal payment was due in April 2017 Venezuela received a $1bn loan from Russia just one week before the due date. At that time Ven 27s dropped 16% in a month (from $52 to $45) and recovered completely within a month. Ven 27 has fallen to $35, as Venezuela has demonstrated that it will be a challenge to make all payments on time. The difference between now and April is that coupon payment delays then came after, not before the payment.

Meanwhile, Venezuela has managed to redefine the concept of payment "on time" which now means "by the end of the grace period"

As we keep track of missed payments, the 5 missed payments, so far totaling $350mn all have a 30 day grace period, as did the $237mn payments over the weekend.

The concern is that the principal payments coming up have:
  • No grace period in the bond indenture for an event of default
  • Three business day grace period before triggering CDS
The concerning principal due dates are coming up, the first of which is this coming Friday, which means in less than 48 hours Venezuela could be in default unless it can find $842 million:
  • Friday, Oct 27 PDVSA 2020 $842mn
  • Thursday Nov 2 PDVSA 17N $1,121mn
The collateral against the first bond is PDVSA's Houston-based refining and retail subsidiary, and in just a few hours, the bondholders may be the (un)happy new ownders of said subsidiary.

"This weekend, there's either going to be a lot of bond holders and traders drinking champagne, or there's going to be a lot of stressed fund managers," said Russ Dallen, managing partner at Caracas Capital Markets

And to help everyone involved, here are some key tables, courtesy of BofA:
  1. Table 1. Ordered by due dates, missed payments and payments due today for Venezuela sovereign and wholly-owned quasi sovereign issuers.
  2. Table 2. Sorted by grace period end dates for missed payments and those due today
  3. Table 3. Debt service due dates for the next 9 months
  4. Table 4. Bond Attributes and face needed to block CACs

Table 1




Table 2



Table 3



Table 4



http://www.zerohedge.com/news/2017-10-25/time-has-come-venezuela-may-be-default-under-48-hours
 

dacrunch

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#3
Since July, I'm up to EIGHT people (in-law family) that I've helped leave Venezuela.
They have to find their own way across the border to Columbia (600 miles from Caracas to Cucuta), by bus... then drag their suitcases across the bridge.

From there, I buy their air-fare to their destinations. One family of four to Medellin, where they've been hoping for job/lodging/immigration status opportunities... and another four to Lima, Peru (where they have a son-in-law, brother-in-law).

Followed by Western Union transfers every so often... 'til they "get on their feet". All hard-working middle-working class folk, a couple retirees in their 80's who couldn't find any medication or food in Venezuela, down to a 13 year-old and a 3 year-old.

It's not just the "rich" now "fleeing Venezuela", but "regular folk". Hunger, lack of medication, rampant mugging & violence & murder - often by LEO's & Military! - (Caracas is the murder capital of the world, btw). Friends still living there go to bed at 5pm, as soon as it starts getting dark.

Back in the 90's, when I went & stayed for 2 six-week stays, it was already pretty dangerous, but nothing compared to today. The "government corruption" which was terrible then is no better now - just a different bunch of corrupt officials.

Just imagining that back in the 1960's and 70's, the country was on an economic par with Europe & the US... is hard to fathom.

And that the "agricultural growing season" is TWELVE MONTHS A YEAR!!!

Talk about "mis-management" ... though there is some truth about the US having participated with the lack of infrastructure there, by requiring that in exchange for crude oil sales, the country would have to "reciprocate" by importing manufactured goods, and not develop their own self-sufficiency in industry, agriculture, and infrastructure.

Always at least 2 sides to a story.

I don't need to "give to charities" - I have "my own". And the "charity money" gets DIRECTLY to the recipient, without paying 6 figure salaries to those who run the "charity". I don't qualify for any "deductions", though... (Perhaps I would, if I opened my own "official charity"... but the legal fees are probably prohibitive... plus the "record-keeping").
 

nickndfl

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#5
Venezuelans are great people and some of the women are stunningly beautiful. If they have sponsors the USA should bring some to Miami, not that there's room.
 

dacrunch

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#6
The USA (Trump administration) has "blockaded" admitting "refugees from Venezuela", from what I've heard. Even didn't allow "sanctuary" a few weeks ago to Luisa Ortega Diaz - the "blackballed" ex-attorney general, from their Congress, who was vocally anti-Maduro, who had to get to Aruba in a jiffy when they were going to jail her husband, and had muzzled her.
That doesn't make any sense at all. So I think she's in Bogota Colombia (where she's much more vulnerable to a Maduro "death squad"). Haven't checked lately.
 

southfork

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#7
Greece defaulted numerous times, they changed the terms on the credit default swaps so they could say there wasn't really a default, so at this point in time what difference does it make? Were 20T+++++ in debt, just passed a 4T budget in house , fake stocks thru the roof and real money like gold and silver are being trashed and trashed..
 

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#9
Greece defaulted numerous times, they changed the terms on the credit default swaps so they could say there wasn't really a default, so at this point in time what difference does it make? Were 20T+++++ in debt, just passed a 4T budget in house , fake stocks thru the roof and real money like gold and silver are being trashed and trashed..
@ SF,
I have been asking the " what dif does it make " thing to myself a few years now.
With the move to all digital everything. Click of button, slice of dice. " Poof"
I mean...." what dif does it make ? "
Its either slavery, to what extent, or no slavery as far as debt goes.
 

Aurumag

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#10
Greece defaulted numerous times, they changed the terms on the credit default swaps so they could say there wasn't really a default, so at this point in time what difference does it make? Were 20T+++++ in debt, just passed a 4T budget in house , fake stocks thru the roof and real money like gold and silver are being trashed and trashed..
In the e-FRN world of quadrillions in ethereal credit "money," $586 million is chump change.
 

nickndfl

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#11
Venezuela should develop their own crypto and artificially inflate it to pay off the debt. Their annual inflation rate is over 2000%!
 

Buck

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#12
Venezuela should develop their own crypto and artificially inflate it to pay off the debt. Their annual inflation rate is over 2000%!
everyone should do this
 

anywoundedduck

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#13
Venezuela should develop their own crypto and artificially inflate it to pay off the debt. Their annual inflation rate is over 2000%!
I agree. They should not print what they can create in cyber thin air. A crypto circus indeed
 

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#14
Turns Out Cocaine Kingpin Not Best Choice To Lead Venezuela Debt Restructuring Push

By Heisenberg

Post a Comment / Nov 6, 2017 at 1:37 PM

Listen, Nomura’s head of Latin America FI strategy, Siobhan Morden, thinks there’s something you need to understand about Venezuela’s efforts to “restructure” their debt and that’s this:

Maduro’s choice of OFAC-designated drug trafficker Tareck El Aissami as lead negotiator makes restructuring a non-starter for investors.

As it turns out, the best way to gain an audience with bondholders isn’t to put a cocaine kingpin in charge of the negotiations.

To let the U.S. Treasury tell it, El Aissami was moving thousands of kilos and has ties to traffickers from Mexico to Colombia.

Of course he’s hardly alone when it comes to being both a Venezuelan government official and a blow trafficker and this certainly wouldn’t be the first time the words “bonds”, “bankers,” “billions”, and “blow” were used in the same story, but asking bondholders to come to Caracas for a pow wow with a sanctioned narco looks like it might be a bridge too far.

“Nobody will want to go near something that could be an OFAC violation,” Gramercy Funds’ CIO Robert Koenigsberger told Bloomberg this week, adding that “if the Venezuelans say, ‘We want to talk over the restructuring with you,’ I’d say, ‘I’m not letting you in the building.’ I like sleeping in my own bed at night.”

Right. And see that’s where this gets sticky for bondholders, because according to the Treasury Department, dealing with El Aissami could land a corporate officer in prison for 30 years and that’s after paying up to $5 million dollars in “I talked to drug lord” fines.

Also, it’s worth noting that this isn’t exactly the kind of guy who you want to run afoul of. For instance, at one point while studying criminology and law (which is hilariously ironic) in the 90s at Mérida’s University of the Andes, El Aissami strong-armed student elections by showing up to events with armed gangs.

After college, El Aissami would take up with Chávez as a vice minister, before becoming the country’s interior and justice minister in 2008. And that’s where the fun really begins. Consider this from The New York Times:

When a prison riot shook the country in 2011, Mr. El Aissami responded by ceding more control to the restive gang leaders in an effort to end the rebellion, said Jeremy McDermott, director of InSight Crime, a research organization.

According to Mr. McDermott, who interviewed people linked to the prison system, the government began relaxing control over the prisons, which allowed gang leaders to take over.

This may have prevented more riots, but it fueled the growth of powerful organized crime rings, known as the pranes, that flourish behind bars and continue to haunt Venezuela today.

“It was one of the key moments in the development of the pranes,” Mr. McDermott said of Mr. El Aissami’s tenure as interior and justice minister.

In 2012, after four years at the ministry, Mr. Chávez appointed Mr. El Aissami governor of Aragua, a coastal state adjoining Caracas. But people interviewed there say that the influence of gangs began to grow shortly after his arrival.

Rodrigo Campos, an opposition politician from the state, says he blames Mr. El Aissami for allowing criminal groups to expand while focusing primarily on cracking down on political opponents. “He was permissive of everything that happened,” he said.

By the time Mr. El Aissami left the governorship to become vice president, the state was among the most dangerous in the nation.

With apologies to what I’m sure is a long list of victims, that is hilarious.

As you can see, it’s not entirely clear that Maduro is serious about restructuring this debt because nobody in their right mind is going to be eager to fly down to Caracas and meet with this crazy bastard.

“This commission will lay the groundwork for true and transparent dialogue between the government and bondholders,” El Aissami said last week, in a televised address.

Yes, “true and transparent dialogue” – with a cocaine cowboy who, as Reuters dryly notes, “has no known experience in debt negotiations.”

To be fair to El Aissami, Reuters is probably mischaracterizing this. There is no way that someone who has moved thousands of kilos of coke has “no experience in debt negotiations.” In fact, it’s probably not a stretch to say that when it comes to debt “negotiations”, El Aissami has more experience than all of Wall Street combined. And I’d be willing to bet he drives a hard fucking bargain.

For their part, Deutsche Bank is not optimistic. To wit, from a new note:

Venezuela – Willingness finally crumbles; prepare for a messy default. Bonds markets reacted swiftly to the “historical” announcement of “restructuring and refinancing” (sic) made by President Maduro on Thursday night, with prices converging to around 30 cents on the dollar (with a couple of exceptions). In our view, the payment for the 17s being made is most likely the last principal payment investors would see out of the Venezuela complex. This is a watershed moment as far as Venezuelan bonds are concerned. Going forward, market will focus more on the recovery value and legal issues, as the long-feared “end game” has drawn near.

But who knows. Maybe El Aissami can negotiate a kilos-for-debt swap.

Assuming everyone gets a decent price at roughly $25k/key, El Aissami would need to come up with something like 2.4 million kilos to make everyone whole.

Catch more Heisenberg over at Heisenberg Report.

https://dealbreaker.com/2017/11/heisenberg-venzuela-debt-drug-kingpin/
 

dacrunch

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#15
(slightly) Off Topic

One night (winter 2000) on the beach of Cancun, I heard (no lights) a power-boat going ultra-fast northward... faster than any boat I'd ever heard...

There goes the "restructuring"=

http://www.reuters.com/article/us-c...aine-its-biggest-ever-haul-idUSKBN1D9005?il=0

#World News
November 9, 2017 / 1:03 AM / a day ago
Colombia seizes 12 tons of cocaine, its biggest ever haul



BOGOTA (Reuters) - Police seized more than 12 tons of cocaine from Colombia’s top crime gang on Wednesday, the biggest haul ever in the nation’s long-running fight against drug trafficking, President Juan Manuel Santos said.

The cocaine, with a U.S. market value estimated by Santos at about of $360 million, was found stored underground on four farms in a banana-growing region of northwest Antioquia province, near Colombia’s border with Panama.

“Thanks to a police operation with overseas intelligence, from friendly countries, the largest seizure in history was made,” Santos said at a police base where the cocaine was laid out in packages on display.

Santos linked the cocaine to the drug-trafficking gang known as the Gulf Clan, which has become one of the biggest threats to security since peace was signed last year with Marxist-led Revolutionary Armed Forces of Colombia (FARC) guerrillas.

The seizure comes as the United States, Colombia’s staunchest ally in the fight against drug trafficking, has raised concern over an increase in coca cultivation and as the government faces criticism from opposition lawmakers for allowing new crime gangs to fill the void left by the FARC.


......

Colombia is one of the world’s leading producers of cocaine, with output of around 910 tons per year, according to the U.S. Drug Enforcement Administration. Anti-drug police have confiscated 362 tons of cocaine this year.

.....

So, how many did they NOT "confiscate"?



........... PS... Just makes me wonder at the amount of "users"... Phew!


 
Last edited:

Alton

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#17
All the gov has to do is make it legal and "Poof!", the war on some drugs is over...like magic! Fewer criminals to crowd corporate prisons, guaranteed use will drop off, fewer addicts, Colombia can grow beyond a drug based economy, Colombian civil wars/infighting will fade into history with no fighting to control drug trade and the riches it brings, banks will "launder" much less money. Political egos will get crushed. A HUGE source of corruption will simply disappear. Government will have less power.

It really is all too easy which is exactly why it will NEVER happen...that is, until gov is totally desperate to do ANYTHING to stay in power.
 

dacrunch

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#18
Over 16 years now that Portugal has decriminalized drugs.... ALL drugs!

How to Win a War on Drugs

Portugal treats addiction as a disease, not a crime.

https://www.nytimes.com/2017/09/22/opinion/sunday/portugal-drug-decriminalization.html

excerpt:

"Decades ago, the United States and Portugal both struggled with illicit drugs and took decisive action — in diametrically opposite directions. The U.S. cracked down vigorously, spending billions of dollars incarcerating drug users. In contrast, Portugal undertook a monumental experiment: It decriminalized the use of all drugs in 2001, even heroin and cocaine, and unleashed a major public health campaign to tackle addiction. Ever since in Portugal, drug addiction has been treated more as a medical challenge than as a criminal justice issue.

After more than 15 years, it’s clear which approach worked better. The United States drug policy failed spectacularly, with about as many Americans dying last year of overdoses — around 64,000 — as were killed in the Vietnam, Afghanistan and Iraq Wars combined."

----------

Crime & Drugs

Portugal’s Example: What Happened After It Decriminalized All Drugs, From Weed to Heroin

By Samuel Oakford

April 19, 2016 | 9:05 pm

https://news.vice.com/article/ungas...-after-decriminalization-drugs-weed-to-heroin

excerpt:

"
That's because 16 years ago, Portugal took a leap and decriminalized the possession of all drugs — everything from marijuana to heroin. By most measures, the move has paid off.

Today, Portuguese authorities don't arrest anyone found holding what's considered less than a 10-day supply of an illicit drug — a gram of heroin, ecstasy, or amphetamine, two grams of cocaine, or 25 grams of cannabis. Instead, drug offenders receive a citation and are ordered to appear before so- called "dissuasion panels" made up of legal, social, and psychological experts. Most cases are simply suspended. Individuals who repeatedly come before the panels may be prescribed treatment, ranging from motivational counseling to opiate substitution therapy.

"We had a lot of criticism at first," recalled Goulão, a physician specializing in addiction treatment whose work led Portugal to reform its drug laws in 2000, and who is today its national drug coordinator. After decriminalizing, the first inquiries Portugal received from the International Narcotics Control Board — the quasi-judicial UN oversight body established by the UN drug convention system — were sharp and scolding.

"Now things have changed completely," he went on. "We are pointed to as an example of best practices inside the spirit of the conventions." Indeed, Werner Sipp, the new head of the board, said as much at the UN's Commission on Narcotic Drugs in Vienna earlier this year."

More at links...

From what I understand, whether drugs are legal or prohibited, it's the SAME PERCENTAGE of the population that's going to use them.
 

Professur

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#19

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#21

searcher

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#22
Venezuela Will Pay All Of Its Debts. Just, Like, Not Right Now.
By Jon Shazar

Post a Comment / Nov 14, 2017 at 4:46 PM


Venezuelan President Nicolás Maduro has a message for the creditors to whom his country owes $150 billion or so: “Venezuela will never get to a default.”

Standard & Poor’s also has a message to those very same bondholders:

S&P downgraded Venezuela’s long-term debt rating to selective default late Monday after it said the government failed to make two bond coupon payments….

Technically, at the moment, both statements are true: Venezuela is in some kind of default in the strict sense of not paying its bills and on account of S&P being a real dick about insisting that South American countries pay their bills, and on time. But it’s not really in default default until a quarter of the people who own selectively defaulted bonds get together and start shouting, “DEFAULT! DEFAULT!” in front of the Presidential Palace in Caracas. Which Maduro says they totally won’t do, and not only because he’d have them shot for it.

On his weekly television show Sunday, Mr. Maduro said 414 investors had confirmed their participation for the meeting, which he said accounted for more than 90% of the country’s creditors.

Between Sunday and yesterday, however, many of them seem to have had second thoughts about keeping their appointment with Maduro’s restructuring committee.

Venezuelan officials provided few details about how they would move forward with a planned debt restructuring during a brief meeting with bondholders at the presidential palace Monday afternoon, according to people who said they attended it.

Most major investment funds skipped the Monday meeting with Mr. Maduro’s restructuring commission, which included two officials blacklisted by the U.S. for alleged drug trafficking and corruption. None of the commission members have an economics or finance background.

S&P Rules Venezuela in Default on Interest Payment [WSJ]

https://dealbreaker.com/2017/11/venezuela-will-pay-all-of-its-debts-just-like-not-right-now/
 

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#23
@ DaCrunch,
Spent both 2000 and 2001 New Years on the beach at Tulum.
Heard it also. Pitch black. Hauling arse cigarette types.
Regards,
I lived in a stick hut on the beach in Tulum, about a mile from the ruins, for a few months, back in the early 80's. The pavement ended there where I lived, however there was a sand road that continued down the peninsula coast to a small fishing village. If you look at a map you will see what I mean. The fishermen there [I road my motorcycle down it with a local who knew people there] often found bales of weed washed up on the shore, it seems sometimes they dumped their cargo if they were being pursued by law enforcement. The fishermen took the bales and stripped off the salt water spoiled outsides, left the good product for the purpose you think. I did some random sampling, it seemed okay. Also all the BBQ lobster etc I could eat for free. They didn't get many visitors, so I was welcome!