PdVSA raising funds ahead of growing uncertainty
The oil company is selling the first new bonds from a Venezuelan state entity in more than a year. It is raising funds ahead of what analysts see as further economic and political deterioration.
Petroleos de Venezuela (PdVSA) is
sell $4.5 billion in new bonds, the first deal by the state
oil company or by the sovereign since May 2012.
The sale comes ahead of the next measure
of the government’s popularity, the December 8
"Polls are showing a strong decline in
President Maduro’s approval rating, suggesting the
possibility of a heavy defeat for the government in
December’s mayoral elections," Barclays said in a
report. "A large setback for the government here could further
weaken Maduro’s leadership, limiting the
government’s capacity to make the necessary
Recent price controls are unlikely to
solve the inflation and scarcity problems, Barclays says.
Although authorities may express a willingness to make some
adjustments to economic policy, at this point it sees
government action as too little, too late.
Venezuelan bonds saw a "large" selloff
Tuesday, on the news of the PdVSA sale and the
government’s decision to force electronics
retailers to lower prices, Bank of America Merrill Lynch says
in a report.
The shop says it awaits the central
bank’s scheduled release of its third quarter
national accounts data on or after November 18, for an
indication of ability to pay going forward. An improvement over
the third quarter 2012 result of $2.3 billion seems likely, it
says. However, BAML expects the economy to contract by 3.3%
year-on-year in the quarter.
"A deep contraction is a sign of
deteriorating conditions that are likely to continue to fuel
social instability, leading to continued governance concerns,"
not issued bonds since a $3 billion sale in May of 2012, and
the Venezuela sovereign has been out of the market since 2011,
according to Dealogic data.LF