We are appreciative of the opportunity to participate in the Latin America Energy Advisor’s latest Q&A on Venezuela.

While ISDA and the rating agencies have put Venezuela squarely in default, the fact is that the country continues to pay principal and coupons. Investors with credit default swaps may be getting ready to cash in, but this early consequence poses virtually no threat to PDVSA’s operations. The bigger question is, when will bondholders be ready to start accelerating payments? Until they do, Venezuelan production declines will continue to be the result of operational inefficiencies, falling capital expenditures and the inability to obtain financing, due in large part to PDVSA’s own risk profile and U.S. sanctions, not default. We find it difficult to envision a successful restructuring.  Read more…