In an announcement made by Petroleos de Venezuela SA (PDVSA), it said it would be selling USD4.5 billion worth of bonds this week. This is the first issuance done by a state entity since May 2012. It comes at a time when government is seeking to increase declining reserves and limit the world's fastest rising inflation rate.
PDVSA said it would sell the bonds privately to select state and private purchasers. The proceeds would be utilized for debt payments as well as financing to boost output, according to company President Rafael Ramirez in an interview with reporters held in Caracas today. He added that the securities may have several maturity dates, without going into any further details.
The Caracas government is seeking to increase its dollar reserves in order to pay for imported goods as well as offset the shortage of locally manufactured goods which is the main cause for the 54% annual inflation rate in the country.
The yield receivable from the country's benchmark bonds maturing at 2027 increased from 0.79 percentage point to 13.82% as of late afternoon trading in New York. This is the highest level for the bonds since January 2012.
According to Ecoanalitica Director Asdrubal Oliveros, in a phone interview from their Caracas offices, "PDVSA is issuing at a very bad moment and almost surely will have to pay a high coupon of between 12% and 13% because the maeket is reacting negatively to (President) Maduro's announcement."
Venezuela is the largest oil producer in South America and would likely be selling bonds to the central bank. The Venezuelan central bank would in turn resell them to international investors, as what had occurred with previous issues undertaken.
The international reserves of the country fell to its lowest level in nine years, at USD21.3 billion today. The scarcity of dollars have limited the supply of products in the market, from medicine to milk, which is not good for a country that imports nearly three fourths of goods consumed by the public.
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