Venezuela’s PDVSA Said to Plan Dollar Bond Sale This Year

Petroleos de Venezuela SA, the state oil company, is considering the sale of as much as $3 billion in international bonds before the end of the year.

The dollar notes would be sold in a private placement to the Central Bank for currency auctions and oil service providers to pay debt, a PDVSA official, who isn’t authorized to speak publicly, said on Oct. 11. The company is studying ways to swap or repurchase debt with maturities from 2014 to 2017, according to the official.

Venezuela will restart dollar auctions on Oct. 16 and sell $100 million a week in a bid to arrest the decline of the bolivar on the black market and boost imports amid shortages of everything from toilet paper to chicken, oil minister Rafael Ramirez said last week. He declined to comment on the company’s plans to sell debt this year when asked Oct. 11 at a press conference in Caracas.

PDVSA is studying two maturity options for the bond sale including 2025 or a date further out on the country’s debt curve, said the official. The company wants to bring its annual debt maturity burden to a manageable level of $2.5 to $3.5 billion and is planning a roadshow next year that will visit London, New York, Beijing and Mumbai to present its results and financial model to investors, the official said.

Debt Swap

PDVSA wants to swap debt from bonds due in 2014 for loans from international banks, the official said. The company is also studying ways to swap or refinance bonds with maturities between 2016 and 2017.

The state oil producer has $9.5 billion of bonds maturing in 2017, compared with $3 billion in 2014, according to data compiled by Bloomberg.

The company, which last sold dollar debt in May 2012, probably won’t sell more bonds next year and is focused on obtaining financing from oil partners to increase production, which is averaging 2.85 million barrels a day in 2013, the official said.

PDVSA has obtained commitments from joint-venture partners for financing totaling $8.5 billion this year to increase oil production to 3 million barrels a day in 2014, said the official, adding that PDVSA was in negotiations with banks and companies in India, Russia, China and the Netherlands for about $5 billion of new financing for oil projects.

The company is allowing joint-venture partners to manage the financing directly.

Dollar Auctions

Restricted dollar supplies have crippled imports in a country that buys 70 percent of its goods from abroad. The shortages have pushed inflation in the past 12 months to almost 50 percent and caused the bolivar to lose 60 percent of its value against the dollar in the black market this year.

Venezuelan President Nicolas Maduro said last week that $900 million had been set aside for dollar auctions through Dec. 31. Venezuela sold $761 million in auctions in July and August.

Venezuela will announce more economic decisions in coming days to guarantee the supply of goods through the end of 2013, Maduro said.

Venezuela sells bolivars at the official rate of 6.3 per dollar on an official system known as Cadivi. Importers who can’t access the official rate turn to the so-called Sicad dollar auction system that sells dollars at a more expensive, undisclosed rate.

Black Market

One dollar currently buys about 45 bolivars on the black market, according to, a website that tracks the value at the Colombian border.

Ramirez said last week that the black market was responsible for rising inflation in the South American country and that its “days were numbered.” The country is working on an alternative currency system and is advancing with plans to modify its currency exchange law, he said.

Annual inflation in Venezuela quickened to 49.4 percent in September, the highest rate among the 112 economies tracked by Bloomberg. The central bank’s scarcity index rose to 21.2 percent, meaning that one of every five staple goods was out of stock last month.

Yields on PDVSA’s benchmark bonds due 2017 rose 0.01 percentage point to 12.16 percent today at 9:36 a.m. in New York. Venezuela’s borrowing costs surged to the highest in the world this month, with investors demanding a premium of 10.21 percentage points to hold Venezuelan dollar bonds over Treasuries.

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