Debt battle for Venezuela: Creditors must be paid before the oil can really start to flow, says ALEX BRUMMER
Untangling the $150billion debt legacy of Venezuela following a default a decade ago will be a mammoth task.
It is made all the more complex by the involvement of China.
Veterans of the Sri Lanka debt reorganisation of 2022 will recall how Beijing held up the rescue by refusing to accept a haircut – a reduction in value – of its loans to the country.
Much of the focus on Venezuela since the forced removal of Nicolas Maduro from Caracas has been on the prospects for a ramping up of oil production.
Indeed, President Trump is already scheduling sessions with expelled American oil giants with a view to returning to a country with some of the largest oil reserves in the world.
Big oil might conclude that it has no choice but to reinvest or risk falling foul of the White House.
Debt burden: The precursor to piling new investment into Venezuela is ending the country's default status so banks and other lenders engage
But the precursor to piling in new investment is ending Venezuela’s default status so banks and other lenders engage.
The restoration of prosperity in Greece required a series of debt deals forged with the help of the International Monetary Fund (IMF) and Brussels between 2010 and 2018. If Venezuela is to leave the socialist orbit and return to global
markets, it needs a sponsor. The IMF often plays the role of facilitator, requiring policy reforms before offering the rescue loans which unblock debt deals.
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Trump may put the US Treasury at the disposal of Venezuela, in the same way as he plied Argentina with emergency loans ahead of last year’s mid-term elections, affirming Javier Milei’s hold on power.
Paul Singer at activist investor Elliott must be rubbing his hands at the possibility of a return to some normalcy in Venezuela. In November, a US judge backed a $6billion bid by Elliott for Citgo, the US oil refining offshoot of Venezuela state-
controlled oil group PdVSA. The sale was forced by the US courts to pay off creditors. Analysts estimate that the facilities bought could be worth twice that.
No one can be sure how much of a haircut bankers would demand from Caracas as the price for restoration to Western markets.
Long-term holders of Venezuelan debt, T Rowe Price and Fidelity, are already reaping the benefit of Trump’s actions with the price of the 11.75 per cent 2026 bonds surging from 32.5 cents prior to Maduro’s arrest to 42 cents now.
Funds such as RBC BlueBay, Canaima and possibly Elliott snapped up bonds more recently at rock-bottom prices.
Payback may be some time off and await a debt reorganisation. But there is an opportunity for early profit taking.
Next up
After dismal surveys from the High Street post-Budget, no one was expecting a bumper Christmas.
Yet once again Next confounded expectations. Chief executive Simon Wolfson knowingly undersells prospects. The group has upgraded its profits forecasts five times in the last year.
In the nine weeks to December 27, it reported a 10.6 per cent rise in full-price sales.
Next’s formula of online and bricks-and-mortar outlets, bringing them together with super-efficient click and collect, helped to deliver a 5.9 per cent uplift in Britain.
There was a remarkable 38.3 per cent rise in sales overseas in 70 different markets.
The company’s background in catalogue selling and a multi-brand approach, now embraced by competitor Marks & Spencer, is paying off handsomely.
M&S brought some sparkle to food sales which jumped 7.2 per cent over the 12 weeks to the end of December.
The resilience of its clothing and homeware sales, in the face of cyber and weather headwinds, will be revealed tomorrow.
Switching off
At a time when eyes have been on the $100billion bidding war between Netflix and Paramount for control of Warner Bros Discovery, another entertainment giant, Comcast, owner of Britain’s Sky, has been reshaping its business.
Proprietor Brian Roberts this week spun off Versant Media Group, home to legacy broadcast channels including totemic brands such as USA Network, the financial channel CNBC, 24-hour news outlet MS NOW (formerly MSNBC) and the Golf Channel.
Despite generating $7billion of income, the market was less than impressed.
Streaming and social media are rapidly displacing terrestrial and cable channels.
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