The structured finance vehicle for Petroleos de Venezuela (PDVSA) announced last week that it had completed its buyback offer, repurchasing US$2.51 billion of a total US$2.61 billion. The deal virtually terminates the presence in cross-border ABS of a company that was once an avid issuer. As of press time, Moody's Investors Service and Fitch Ratings had not commented on their Caa1' and BB-' ratings following the tender deadline. However, Fitch confirmed its rating when the tender hit US$2.49 billion, suggesting the grade will stick under the marginally higher figure. A week prior to the deadline, Standard & Poor's indicated that it would likely downgrade its B+' rating on the bonds, given that the tender came hand in hand with a perceived weakening of covenants (see ASR 7/19, p.22).
Still, investors holding on to the remaining US$100 million are likely to have tremendous leverage with the company, as the debt coverage ratio in the structure is expected to skyrocket on such a relatively paltry volume of debt. PDVSA, observers say, will be loathe to keep flows as high as US$5 billion on US$100 million of debt.
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