Wall Street Exhales After Venezuela Makes Another Bond PaymentBy
Investors had increased bets on default in next six months
Bondholders say they expect to receive payment this week
Investors in Venezuelan securities are breathing a sigh of relief after the government once again made good on its promise to pay foreign bondholders.
The nation, one of the world’s riskiest debtors, said yesterday it was having difficulty wiring a $185 million interest payment that was due Sept. 15. Officials confirmed Thursday that the money was on its way to bondholders. Bank of New York Mellon, the paying agent on the notes, has processed the funds, according to two people with knowledge of the matter.
“This helps a bit,” said Stuart Sclater-Booth, a money manager at Stone Harbor Investment Partners in New York, who puts Venezuela’s odds of avoiding default this year at 60 percent. “You know that they are looking under the mattress, under the cushions and going through pants pockets in the laundry for every last dollar when a payment is due.”
Venezuelan bonds rallied Thursday, erasing some of the losses incurred during the previous session. But even with the coupon appearing to get paid well within the 30-day grace period, the delay may be a bad omen for the months to come. Almost $4 billion of payments, mostly by the state oil company, are coming due by year-end. Some of those have no grace period. A default could lead to what some lawyers say would be the messiest restructuring ever.
Several holders of Venezuela’s $4 billion of bonds due in 2027 said that they have yet to receive the payment, but expect to before week’s end. The implied probability of a default within the next six months has spiked to 63 percent from 43 percent a month ago, according to credit-default swaps data compiled by Bloomberg.
“I can’t say I wasn’t concerned this week, but it was likely they’d have operational issues,” said Shamaila Khan, the director of emerging markets at AllianceBernstein, which Bloomberg data show is the largest reported holder of Venezuela’s 2027 bonds. “The bigger issue would’ve been if the government said they weren’t going to pay.”
— With assistance by Christine Jenkins