00:00Venezuela is preparing to launch one of the world's largest ever debt restructurings as it aims to rework billions of
00:05dollars of defaulted bonds and loans.
00:07Bloomberg News Emerging Markets reporter Maria Elena Vascaino joins us now.
00:12And Maria Elena, how did the market react to Venezuela's announcement that it will start restructuring $170 billion of these
00:19defaulted bonds and loans?
00:20Right. So the government announced that they had hired a sovereign debt restructuring advisory firm to commence the progress.
00:28And it sort of took investors by surprise. They were expecting this to drag out for a lot longer.
00:35It was only last week that the U.S. Treasury allowed the government to hire someone.
00:39So the bonds, you know, the benchmark 2027 bonds were about one to two cents on the dollar.
00:46But if you really want to look at this whole thing, you have to go back to January.
00:50This is just one piece of the puzzle, you know, for the excitement that has been building up over the
00:55last five months.
00:58Right. Those same bonds in total have rallied 23 cents on the dollar.
01:02OK. So that's pretty notable here. And I guess what's taken people by surprise is how quickly things have progressed.
01:08So having said that, how soon can a restructuring get done?
01:11Yeah. I don't think anybody knows. You know, the licenses that the U.S. issued only allow the government to
01:18hire advisors,
01:19not to actually restructure, transfer or sell new securities. So technically, a restructuring, it's still illegal.
01:26So we're on the U.S. government timeline for this.
01:29Oh, interesting. So what do the advisors then do? They're just kind of thinking big thoughts at the moment?
01:33Yeah. Possibly. You know, there's a lot to do in Venezuela, which has been defaulted since 2017.
01:42So the IMF has to come in and do a debt sustainability assessment, which is sort of the master document
01:48that, you know,
01:49all kinds of creditors go off to determine how much each one of them is going to get paid.
01:56There's other things complicating this situation, which is that because Venezuela has been in the fault for so long,
02:02there are a lot of judgments from U.S. courts over the nation's assets,
02:07which doesn't typically happen in sovereign restructurings because they get sold quicker.
02:13And lastly, you know, you have the political situation in Venezuela.
02:17Like, how does the restructuring timeline interact with the political, local political timeline?
02:22You know, are there elections? Won't there be elections?
02:25So this is just the surface of what's going to happen here.
02:30Absolutely. And the other huge wrinkle here is that U.S. economic sanctions remain in place.
02:35That has not been removed.
02:37Right. I mean, it's illegal for them to actually restructure, to actually issue new debt as part of a restructuring.
02:45So this is just the very first step towards that, that, you know, investors have been building up since January.
02:53Are bondholders ready to engage?
02:56Oh, yeah. They have been ready.
02:59You know, there's been a bondholder group for years.
03:01And over the last couple of years, more and more firms have joined.
03:05We actually reported that they met, you know, with U.S. officials during the IMF spring meetings in April.
03:12They're ready. You know, if you ask the bullish investors, they'll tell you that this will all be done by
03:18the end of next year.
03:19Now, I don't know if that's the case. Right.
03:22There's a lot more to think about.
03:25Absolutely. So talk about some of the overall hurdles here that investors expect from the process.
03:29I mean, we mentioned the economic sanctions.
03:31We mentioned the political messiness of this whole thing.
03:34But any debt restructuring is difficult enough as it is without these extra factors thrown in.
03:40Yeah. Well, they have the court judgments, right?
03:42Like Venezuela has issues with Citgo, its U.S. refinery.
03:49And they're in the process of selling the assets after the court granted a judgment.
03:54How does that play into the restructuring?
03:58I mean, because it is probably the most valuable asset that the nation has and other bond lawsuits here and
04:07there.
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