Venezuela Defaults On Russia; Is Goldman Sachs Next?

ForbesVenezuela defaulted on part of its $2.5 billion loan from Russia’s state-controlled oil company Rosneft once again, giving Wall Street bond lords cause for concern that a default on PDVSA oil bonds is right around the corner. PDVSA is a quasi-sovereign and is the government’s only remaining cash cow. The government owed Rosneft a reported $950 million.

News of the missed payment sent Venezuela’s $3 billion government bond due 2022 to trade at around 57 cents, for an annualized yield of 29.3% for those lucky (or unlucky) enough to be buyers at those levels. Assuming the par value of the bond was $100, that means the bond is now worth $57. Some bondholders in London immediately questioned whether or not the missed Russia payment constituted a default, the Financial Times reported. The International Swaps and Derivatives Association said it did not.

Investors have been waiting for an official default for nearly a year now. Venezuela keeps pulling a rabbit out of its hat. Last month, Goldman Sachs “loaned” the government $2.8 billion by buying distressed PDVSA bonds. The purchase sent the anti-PSUV crowd into the streets of New York, calling into question the beating, bleeding heart of the famous American “vampire squid.” In its original statement, Goldman said: “We recognize that the situation is complex and evolving and that Venezuela is in crisis. We agree that life there has to get better, and we made the investment in part because we believe it will.” …



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During the last several decades, the United States has invested billions of dollars in trying to help the governments of Latin America and the Caribbean deliver better lives for their citizens. This has meant helping them increase internal security by combating the illicit growing and trafficking in narcotics and the activities of terrorist groups, as well as helping them to shore up their democratic and free market institutions.

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