Weak EM sees slight recovery into close; Venezuela, PDVSA bondholders eye Monday meeting

By Rebecca Melvin

New York, Nov. 10 – Emerging markets remained soft and saw further spread widening on Friday, although the market came back a little bit into the late session, as widening trends remained in place, namely geopolitical fears tied to the Middle East and elsewhere and investor caution related to preserving profits achieved this year as year-end comes into view.

Venezuela and Petroleos de Venezuela SA credit was on the upswing of what was a roller coaster week at extremely distressed levels. The Venezuela and PDVSA debt market rallied on Thursday after PDVSA’s $1.1 billion principal payment on notes due Nov. 2 came through a week late, but then it fell again on a default announcement by CA Electricidad de Caracas (Elecar)’s trustee, a market source said. It rallied again however when Elecar announced that it had paid the bond.

On Nov. 13 a widely anticipated meeting of Venezuelan bondholders will be held.

This weekend coupon grace periods expire for the Venezuela notes due 2019 and 2024 and the PDVSA notes due 2027.

In regard to these coupons, Monday is crucial because it will determine whether the sovereign and its state-owned oil company default on those coupons, analyst Victor Fu of Stifel Nicolaus & Co. Inc. said.

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