Caracas Chronicles

Bond people are still in a state of collective shock over Eulogio del Pino’s press release extending the PDVSA Swap deadline last night. Using language that’s just not usual in this world, DelPi good as threatened to default if bondholders don’t come forward to swap.

“If the exchange offers are not successful, it could be difficult for the company to make scheduled payments on its existing debt,” is how PDVSA put it in its statement. Gangster style.

Two interpretations spring to mind. Del Pino is either bluffing or he is outright desperate.

Under the first interpretation, del Pino keeps extending the deadline to keep working large, undecided bondholders, trying to persuade them to opt-in to the swap. PDVSA is pledging 50.1% of CITGO no matter what % of bondholders buy-in, so del Pino is shmoozing with the big fish behind closed doors to max out bondholder participation and squeeze the CITGO lemon till its dry. The threats and insinuations in PDVSA’s press releases are bluffs to scare the big bondholders into buying in, or at least selling their bonds so that new bondholders can buy-in.

Either way, he’s decided to make things exciting. PDVSA is on the hook for $2 billion on November 2nd, when the 2017 8.5% bond in the swap amortizes.

The second interpretation is that bondholder buy-in is abysmal, and that del Pino’s extensions and threats are nothing but #TropicalMierda desperation. Del Pino is looking 12 months down the line, seeing that the numbers add up to capital D, and is throwing one last hail mary, one last huida hacia adelante, to see if the market can save him.

Either way, he’s decided to make things exciting. PDVSA is on the hook for $2 billion on November 2nd, when the 2017 8.5% bond in the swap amortizes. You know, just a couple of days after we line up to sign the Recall petition, as the CNE is precog announcing we didn’t make 20% in every single state, and shit majorly hits the fan.

#ExcesivamenteNormal

Stepping back, though, what we saw yesterday is a remarkable departure. For the last two years, everyone from Barclays to Bank of America to pretty much every other analyst that follows the Venezuelan economy has talked about the government’s “willingness to pay” its external debt. It’s an ubiquitous phrase in news about Venezuelan debt.  It’s even in today’s Reuters write-up.

Almost everybody that ever went to a meeting with Chavista policymakers came out saying something like “willingness to pay is very high”. But PDVSA’s communique yesterday put a lid on that.

“We’re willing to pay” they said, “but only if you’re willing to play”.