LONDON/NEW YORK (Reuters) – Venezuela’s sovereign bonds rallied on Thursday, a day after the United States lifted its ban on secondary market trading of some of the country’s eurobonds.
Quotes for the South American nation’s sovereign debt rose to as much as 20 cents on the dollar while a 2020 note of state oil company PDVSA was up 13 cents at 66.5.
“Prices have almost doubled in the past 24 hours but are still well below the pre-sanctioned levels,” said Edward Cowen, CEO of Winterbrook Capital, who has co-invested in a fund to buy Venezuelan debt.
“Expectations of recovery value on a full restructuring vary between 40-55 cents,” he added, saying that a return to Venezuela’s regular weighting on global indexes like JPMorgan’s would give the prices further support.
On Wednesday, the U.S. Treasury Department said it had amended two licenses to remove its long-held secondary market trading ban on certain Venezuelan sovereign bonds and on the debt and equity of the state-run oil company PDVSA, in response to a deal reached between the government and opposition parties for the 2024 election.
Investor interest had increased after Washington’s decision not to block the potential seizure by creditors of shares in Venezuela’s most important offshore asset, oil refiner Citgo Petroleum Corp.
Yet the decision caught bond investors off guard as negotiations between the Venezuelan government and the opposition are just restarting.
“I think the market was caught by surprise as the ban on secondary trading of bonds was not expected to be removed this early in the negotiation,” said Armando Armenta, an analyst for Latin American fixed-income and currency markets at AllianceBernstein.
“We are sure the U.S. State Department is fully aware of the hurdles ahead and will be ready to act if the Venezuelan government does not comply with their end of the agreement.”
He added that a key development would be whether lead candidate in the opposition primary Maria Corina Machado’s ban to run is removed.
Venezuela and PDVSA, which have more than $60 billion in debt, stopped paying bondholders at the end of 2017 and several creditors filed lawsuits in court.
Small funds and investors outside the United States had looked to increase their exposure to Venezuelan bonds on the expectation of debt renegotiations.
(Reporting By Marc Jones and Rodrigo Campos and Mayela Armas in Caracas, editing by Christina Fincher)
