Venezuela Credit Dashboard: Default Risk Spikes as Payment Looms

(Bloomberg) -- Traders boosted their bets on a Venezuela default as state oil company known as PDVSA faces a $2 billion bond payment next week.

The implied probability of nonpayment in the next 12 months surged to 56 percent in March from 40 percent in February, according to credit-default swaps data compiled by Bloomberg. That's the biggest jump in the perceived risk of a short-term default since November, when cash-strapped Petroleos de Venezuela SA missed coupon payments due on its bonds and had to use a 30-day grace period as the opposition called for a national strike and protests.

The political turmoil just got worse. Venezuela's sovereign bonds plunged after the Supreme Court said March 29 it would take over the duties of the opposition-controlled National Assembly -- a decision that was reversed on Saturday. If PDVSA manages to pay its debt on April 12, the company and Venezuela will get some breathing room before facing payments of $3.5 billion in October and November. The odds of a credit event over the next five years is 92 percent, according to CDS data.

Market Voices

• “I still think they're going to pay. Things aren't easy. They're really pulling the coins out of the sofa to pay these bills. Do I think they have the entire $2 billion dollars right now? I think they have a little here, and a little there. I think they'll be able to cobble it all together. Fighting a political war and defaulting at the same time would just open up too much for them. I still think that the willingness and ability to pay are there” -- Ray Zucaro, chief investment officer of Miami-based RVX Asset Management

• “Given our research and all the tells -- especially that they were already so broke that PDVSA was two weeks late and in technical default in November -- and that Venezuela and PDVSA must pay $3.7 billion over the next two months, I would not have my money in this credit at the moment. And I would certainly not be in the maturing PDVSA 17 where you risk 95 cents to make 5. Even Vegas gives you better odds than that!” -- Russ Dallen, managing partner at Caracas Capital

Venezuela Dashboard Indicators

• Venezuela's dollar bonds had their worst month since January 2015, with benchmark $4 billion of notes due in 2027 falling 12 percent in March to 46.2 cents on the dollar; yields rose to 23.1 percent
• PDVSA's oil export basket price slid 12 percent to $41.46 a barrel
• Venezuela's international reserves were mostly flat in March, continuing to hover around a 15-year low of $10.4 billion
• The weakest official exchange-rate, used mostly for imports deemed non-essential, slumped 1.4 percent in March to end the month at 709 bolivars per dollar
• On the illegal black market, the U.S. currency costs more than five times as much. With the government saying they plan to re-launch the alternative market this week, investors will be watching to see if it actually does anything to help alleviate the country's ongoing shortage of hard currency

To contact the reporter on this story: Nathan Crooks in Miami at ncrooks@bloomberg.net.

To contact the editors responsible for this story: Rita Nazareth at rnazareth@bloomberg.net, Daniel Cancel at dcancel@bloomberg.net.