A Major Asset Manager Put a Price on Goldman's Infamous ‘Hunger Bonds’By and
‘Hunger bonds’ from Venezuela’s PDVSA marked at 33 cents
Valuation level suggests a small profit for SEI’s fund
Goldman Sachs Group Inc.’s investment arm has $2.8 billion of bonds from Venezuela’s state oil company that don’t trade. Brokers have prodded investors on what they’d pay if the debt goes on sale. But so far there’s no clarity on price.
One bondholder -- SEI Investments Co., an Oaks, Pennsylvania-based asset manager -- reported in a filing that the securities are worth 33 cents on the dollar at the end of last month. SEI came to hold $8.9 million of the bonds because Goldman Sachs Asset Management serves as a sub-adviser on a portion of its assets.
GSAM’s purchase last month of the bonds, previously held by the central bank, for 31 cents on the dollar enveloped the company in controversy after the Wall Street Journal reported the deal, which lawmakers and activists say provided a cash lifeline to a despotic regime running perilously low on funds. Critics have labeled Venezuelan government debt “hunger bonds,” arguing that President Nicolas Maduro’s decision to keep servicing overseas notes is inhumane given rampant shortages of food, medicine and other basic goods.
SEI declined to say how it came to its valuation for the notes, which mature in 2022, but a spokeswoman said it’s in accordance with the requirements listed in the fund’s prospectus. Goldman, which may use a different method for pricing the bonds, hasn’t reported holdings in its Emerging Markets Debt Fund since the end of April.
GSAM bought the bonds on behalf of its clients, which include investment firms like SEI that hire outside managers to oversee some of their assets. Goldman’s asset-management unit hasn’t offered the bonds to any dealers, according to Andrew Williams, a spokesman for the bank. No trades have been recorded by Trace, Finra’s bond-price reporting system.
Assuming a purchase price of 31 cents, the mark at 33 would imply a profit for SEI. Still, the indicative prices investors saw brokers quoting Friday were as low as 32 cents. Investors have been leery of the securities, which Venezuela’s opposition says are illegitimate and won’t be repaid if it takes control of the government.