PDVSA bonds tumble after New York court undermines legitimacy
A day after a New York court ruled that Venezuelan law will determine the validity of bonds issued by state oil company PDVSA, Bloomberg reports that the bonds have “collapsed,” amid doubts about their validity. At stake is $2 billion in PDVSA bonds, and PDVSA bonds fell 17 cents following Tuesday's ruling, according to Bloomberg.
On Tuesday, the New York State Court of Appeals ruled on the issue after the Venezuelan opposition, which controls the state oil company's US operations, said the 2020 bonds were invalid because they had not been approved by the National Assembly of Venezuela. The New York Court of Appeals ruled that validity must be determined by the local law of the place of issue, so a Venezuelan court will have to decide. This
The Venezuelan opposition is trying to invalidate the bonds because they are backed by a 50.1% stake in Citgo Holding, the holding company that gives state-owned PDVSA ownership of Citgo, an American petrochemical group that owns several refining plants In the USA. In turn, invalidating the bonds would prevent creditors from seizing Citgo, as Reuters reports.
In mid-October, PDVSA bonds spiked after the Biden administration moved to allow U.S. investors to buy the bonds in line with a sanctions package for Venezuela. The removal of those restrictions led to a 10-cent jump in Venezuelan government bonds and a doubling of the price of PDVSA bonds. Bloomberg reported.
The bonds are very attractive to US investors due to their price/yield, the collateral provided by the stake in Citgo and the normalization of relations between the US and Venezuela.
“Lifting the trading ban will likely unleash significant pent-up demand from Americans,” Guillermo Guerrero, a London-based senior strategist at EMFI, wrote in a note published by Bloomberg in October. “This, coupled with the general optimism that these developments will inevitably bring, warrants a significant rise in bond prices.” As long as these are considered valid.
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The article PDVSA bonds collapse after New York court undermines their legitimacy comes from Economic Scenarios .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/le-obbligazioni-pdvsa-crollano-dopo-che-il-tribunale-di-new-york-ne-ha-minato-la-legittimita/ on Thu, 22 Feb 2024 15:34:13 +0000.