about the debt

The drop this Monday adds to the wave of sell-offs that have occurred since Venezuela initiated its debt restructuring, with sovereign bonds causing losses of around 6% for investors since mid-May

This Monday, June 22, Venezuelan bonds dropped to their lowest level in the past two months, as investors braced for a highly anticipated review of the country’s debt load and its economic outlook.

Sovereign bonds have crashed across all maturities. Those maturing in 2027 fell below $0.50 for the first time since April 10, while those issued by the state-owned Petróleos de Venezuela S.A. (Pdvsa) also saw declines. This wave of selling shows increasing investor unease ahead of the upcoming report this month on the economic situation and a debt sustainability analysis.

Last May, Venezuela officially started a debt restructuring process, estimated between $150 billion and $200 billion. The interim government hired Centerview Partners as financial adviser.

This report, known as the DSA, is expected to help shape negotiations with creditors and serve as a guide for what could become one of the largest and most complex sovereign debt restructurings in a decade.

In this regard, Ramiro Blázquez, strategist at the U.S. global financial and tech firm StoneX, stated that "the lack of news about the DSA could be increasing uncertainty around restructuring prospects, especially since valuations seem to have priced in a significant outcome" and added that, in a more conservative scenario, a deeper debt cut would be anticipated.

However, the accelerated preparation of the report has increased skepticism among Wall Street analysts. Venezuela has only recently resumed publishing basic macroeconomic data and has yet to complete an independent review of its finances or request help from the International Monetary Fund (IMF), complicating the prospects for a credible restructuring framework.

According to this, analysts from the financial services firm Barclays, Alejandro Arreaza and Jason Keene, highlighted in a recent report that an overly favorable offer in the market risks being perceived as unsustainable.

The drop this Monday adds to the selling wave that has occurred since Venezuela initiated the debt restructuring, with sovereign bonds causing losses of around 6% to investors since mid-May, according to data compiled by Bloomberg.

Since last January, the Trump administration has supported efforts to boost oil production and reopen the economy to foreign investment, raising expectations about a political restart in Venezuela that could pave the way for resolving its enormous debt burden.

However, these expectations must navigate obstacles. The first is the publication of the DSA, highlighting that Venezuela cannot start formal talks with creditors without authorization from the U.S. administration, as sanctions imposed by the U.S. Treasury Department prevent both a restructuring attempt and new debt issuance, Bloomberg indicates.

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