Despite Trump Waging ‘Economic War’, Catastrophic Debt Default Avoided By Venezuela Oil Giant PDVSA

Avoiding a catastrophic default that could have seen the company lose control of the U.S.-based refiner Citgo, one of its crown jewels, Venezuela’s state-owned oil giant announced on Friday it had made a critical debt payment.

Dspite the “economic war” that U.S. President Donald Trump is waging on Venezuela, it honors its debts, said Petreleos de Venezuela SA in a statement.

On a bond that was backed by Citgo, it was processing $841 million in principal due Friday, said PDVSA, as the company is known. As the company remained radio silent about the payment, the statement capped a tense week for bondholders.

Concerns that PDVSA would not make the payment were expressed by asset managers and bondholders as recently as Thursday evening. Following initial reports that it would avoid default, after the company failed to make a statement, bond prices had tanked.

It would also skip a $1.2 billion payment on a bond that matures on Thursday, the market feared if PDVSA defaulted.

With the payment on Friday, the “state confirms its full solvency and its ability to respond to its commitments, despite the economic war, the unjustified imposition of sanctions by Donald Trump,” PDVSA said in a statement posted to its Facebook page.

Following President Nicolas Maduro’s effort to consolidate power and sweep aside political opposition in the nation’s parliament, the United States has imposed a series of sanctions on Venezuela this year.

“It should be noted that the Bolivarian Republic of Venezuela, through PDVSA, has consistently honored its obligations, therefore refuting the voices of those betting in favor of the economic fall of the country,” PDVSA said in the statement.

Sparked by years of economic mismanagement made worse by a three-year downturn in oil prices, Venezuela has spiraled into a full-blown crisis. As Maduro prioritizes paying Venezuela’s international creditors, food shortages, runaway inflation and violent street clashes have been suffered by the county.

PDVSA’s deteriorating situation would have been worsened by a default on the debt due Friday. Making it harder to drum up the revenues that keep the government running, Venezuela’s oil production is slipping due to lack of maintenance at PDVSA. The company has been blocked from key export terminals and customers have canceled orders and demanded refunds as they have been upset with the quality of PDVSA’s crude oil.

Nearly $600 million in interest payments on seven bonds was missed earlier this month by the government, PDVSA and the utility Electricidad de Caracas. Concerns that sanctions were making it difficult to transfer funds to bondholders were stoked by the skipped payments. By skipping the smaller interest payments, which have 30-day grace periods, leaders were shoring up cash to pay the two high-stakes principal payments, others speculated.

Though some say as much as half of that may be in illiquid assets, Venezuela’s foreign reserves have stood around $10 billion recently.

(Adapted from CNBC)

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