So, if Venezuela has not paid the Electricidad de Caracas 8.5% of April 10, 2018 coupon by the end of today, that 30 day “grace” period will have ended. The $27.6 million payment was originally due on October 10. I have been hitting refresh on the feeds all day to see if any announcement comes that it has been paid but the only thing that the Venezuela Office of National Credit keeps tweeting is to come to Caracas on Monday to talk about your bonds. EDC (or Elecar as it is shortened on the Bloomberg terminal) becomes the first to fall, but it does not cause direct cross-default with either Venezuela or PDVSA (but we have some theories as to how), so it was always the weakest link. In addition, Venezuela was going to have to pay its $650 million maturity in 6 months. Under the ticker ELDAY, Electricidad de Caracas used to trade on the US stock markets as an ADR (American Depositary Receipt) until Chavez nationalized it.
With all that happening and said, we saw a bounce in the afternoon as buyers continued heavy accumulation in positions in certain bonds, with the highest coupon PDVSA 12.75% of 2022 being a favorite. This continues a trend we have been seeing this week and it is especially unusual because its sister Venezuela bond with a 12.75% coupon that also matures in 2022 is trading at a price under 24 while the PDVSA 12.75% of 2022 is pushing toward 30.
We have some thoughts on reasons for this divergence and we are happy to discuss.
One final thing, we can confirm that the Principal payment (not the interest) on the matured PDVSA 8.5% of November 2, 2017 has arrived via DTC this afternoon. Maduro had said they were paying both the principal and coupon last Thursday, as had Tareck El Aissami. We believe that the payment is too late to stop the triggering of the CDS (Credit Default Swaps, insurance contracts), but we will know that for sure tomorrow afternoon. The ISDA (International Swaps and Derivatives Association) Determinations Committee is meeting Friday at 11 to decide if a “failure to pay event” has occurred. To avoid that determination, the money would have to have been delivered within three business days of November 2, so today’s arrival will be too late, but will never-the-less warm the cochleae of bondholders’ hearts.
In the meantime, here are the markets the desk is making as we head into coupon whack-a-mole.