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Published on 6/29/2004 in the Prospect News Emerging Markets Daily and Prospect News High Yield Daily.

PDVSA to buy back over $2.5 billion of bonds

New York, June 29 - Petroleos de Venezuela SA said that it will buy back $2.5 billion and €88.4 million in PDVSA Finance Ltd. bonds, as part of a plan to reduce its foreign debt, estimated at some $6 billion, and increase its financial flexibility. The dollar bonds have maturities of between 2006 and 2028, while the euro bonds mature in 2006.

The company is also soliciting noteholder consents to proposed changes in the bonds' indentures, as well as waivers of certain other provisions.

It set a consent deadline of 5 p.m. ET on July 12 and said the tender offer would expire at 12 midnight ET on July 26, with both deadlines subject to possible extension.

PDVSA, Venezuela's state owned oil company, said that it will offer to buy the dollar-denominated bonds at total consideration ranging between $910 and $1,002.50 per $1,000 principal amount of bonds tendered and accepted for purchase by the company. It is offering total consideration for the euro-denominated bonds of €1,027.50 per €1,000 principal amount. Total consideration will include a consent payment for those holders tendering their notes by the consent deadline.

Approval of the indenture changes and waivers requires the consent of the holders of at least a majority in principal amount of the bonds, by means of joint voting forming one class.

The company is expected to fund the repurchase using monies earned from the recent sharp spike in world oil prices, which has strongly benefited Venezuela, the world's fifth-largest oil exporter

Deutsche Bank Securities Inc. and J.P. Morgan Securities Inc. are the dealer-managers and solicitation agents for the tender offer and consent solicitation. D.F. King & Co. is the information agent. J.P. Morgan Bank Luxembourg SA is the agent for the offer in Luxembourg.


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