Venezuela: Oil for bonds, bonds for debt

Bartering away,

First India,

Venezuela can’t pay its millions of dollars in debt to Indian pharmaceutical companies, say Indian officials, so officials are considering a proposal that would see the Latin American company swap oil for its drug debts.

Now this,
PDVSA Offers Debt Exchange to Service Providers. Under the deal, subsidiary of Petróleos de Venezuela would give bonds to suppliers who agree to cancel some unpaid invoices

Under the deal, a subsidiary of Petróleos de Venezuela SA, known as PDVSA, would issue a three-year international bond and hand it to approved suppliers in exchange for cancelling some of the $20 billion worth of unpaid invoices. The bond would be priced at about a 40% discount to the company’s benchmark obligation, which currently trades at about 45 cents on the dollar, said the sources and the deal prospectus.

You’d be rolling the dice on the latter one: Are you willing to the take the bonds now, which are less than the amount of debt you would get back through litigation?

While you think about that, keep in mind that

The Venezuelan government and PDVSA are due to make about $6 billion worth of bond payments through the end of the year, obligations which consultancy Sintesis Financiera believes can only be met by cutting imports of basic goods to the lowest per capita levels since the 1950s.

And, on top of it, here’s what oil production looks like,

source: tradingeconomics.com

The Venezuelan economy is 95% dependent on oil exports.

How bad are things? Bad enough that government-financed Telesur is doing a fundraiser.