Caracas Chronicles

Here’s the easiest way to understand the BCV-Goldman Sachs bondmaggedon shitshow. PDVSA had something that today is worth $1,165,000,000 — $1.17 billion pa los panas. And what did BCV do with it? It sold it for $865,000,000.

That whooshing sound you hear is the Republic pissing away the difference: a cool $250 million that BCV put a bow on and handed off to Goldman Sachs.

(There’s some confusion about these numbers because the thing that BCV sold happens to be a formal commitment issued by PDVSA to pay back $2.8 billion, plus interest, by 2022, but that promise from PDVSA today isn’t really worth $2.8 billion. That’s what it would be worth if the bonds were worth 100 cents on the dollar, but they aren’t because they’re junk bonds that everyone thinks will default. Realistically, similarly structured bonds are going for about 40 cents on the dollar — $1.17 billion, i.e., $250 million more than Goldman Sachs paid for them.)

How does a regime willing to go that far to shore up a a few hundred million bucks just flush the same amount down the toilet for no reason at all?!

Now, here’s the crazy part. As Venezuelans, we’re conditioned to believe that whenever great big sums go missing, somebody in government is stealing. And that may indeed be the case: the Central Bank sold the bonds to Goldman Sachs through a shady intermediary named Dinosaur Group, and that part of the deal looks, smells, walks and quacks like a guiso. But the weird thing is that the BCV-Dinosaur component is a tiny shard of the money being pissed away here. Maybe on the order of $25 million. The much bigger chunk isn’t being divvied up between corrupt Venezuelans and shady intermediaries. It’s a straight-up gift to Goldman Sachs.

None of this makes any sense. If you’ll remember, the current bout of country-shaking protests was set off because PDVSA was running around like a chicken with its head cut off, scrambling to flush the constitution down the toilet so it could sell of chunks of a shady Joint Venture to a Russian oil company and raise…a few hundred million dollars. To stave off default. How does a regime willing to go that far to shore up a a few hundred million bucks just flush the same amount down the toilet for no reason at all?!

The cochinada hasn’t been consumated. Not quite yet.

Now, here’s the interesting part: Goldman Sachs just bought something it could sell right away for about $1.17 billion, for $865 million. But it hasn’t done so yet. Instead, it’s sitting there, holding those bonds. As of right now, nobody’s bought or sold any of these weird bonds on the open market.

The cochinada hasn’t been consumated. Not quite yet.

So Traders around the world are sitting behind their Bloomberg terminals just watching…and waiting. Yesterday, for a few minutes, a mysterious offer flashed across their terminals offering to sell PDV22s at 42.5 cents on the dollar — which, assuming it was a real move by Goldman and not some sick joke, would’ve made the cochinada worth $320 million! — nobody took it, and the offer was soon withdrawn.

This makes the experience of watching your bbg terminal weirdly like surveying the scene of a crime. A crime that hasn’t quite happened yet…but it could hit at any moment.

Bizarre. And disturbing.