Here's What Could Happen to Venezuela's Messy $170 Billion of Debt
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Hello and welcome to another episode of the OddLots podcast. I'm Traci Alloway.
And I'm Joe Weisenthal.
Joe. Venezuela.
Venezuela week.
So we've done the oil market.
Yeah.
We got to do the debt market.
We got to do the debt market. I don't know anything about this stuff, so we got to do it. Well,
OK. One of the reasons that I really like covering the debt market, bonds, is because I think we're used to thinking of bonds as contracts.
Yeah.
But I always like to think of them more as stories. So they're full of all these narratives and embedded values and history. And there's actually a great quote from Margaret Atwood. She wrote this whole book called Payback on Debt. And she describes it as a story or a memory of who owes what and why.
Yeah.
And of course, if you're talking about a story or a narrative, those can change over time, right?
Absolutely. I mean, so one thing I know is that just since Saturday morning and the early trading, I think the existing defaulted Venezuelan debt that's out there, I think it's rallied. I think it's gone up. Oh, yeah. But I don't understand, like, you know, you're trying to get the economy going again. You're going to make everybody pay for this money that was borrowed by someone who the international community regards to be legitimate as a dictator. Mm-hmm. If anything, shouldn't the creditors that facilitated his ongoing rights, shouldn't they have to pay? Not only should they not get paid back, shouldn't they pay the people of Venezuela extra for having subsidized someone that is widely regarded to be a criminal?
We're calling this guy a narco-terrorist. And yet, so it's like, shouldn't we punish the people who lent to him?
Maybe you should be on the restructuring team, Joe.
No, but it's true.
So this is the debate. So you're right. Bonds have rallied. So there's Venezuelan sovereign debt. There's also debt issued by PDVSA. And those have gone from like five cents on the dollar a few years ago to more than 30 cents. So people are already making money. And the bet here is that there is going to be some sort of restructuring and they're going to get more money. And of course, the creditors, the investors always want more. Meanwhile, there's a strong argument that the Venezuelan people should have their debt load alleviated in some way.
Yeah, I'm in favor of a negative
recovery.
Okay.
All right. Well, we really do have the perfect guest
to
talk about all of this. Someone we've had on the show before, but it's been a while. We're going to be speaking with Lee Buchheit. He is a retired lawyer now. He's had a 40-year legal career, worked on more than two dozen sovereign debt restructurings, including Greece and Iraq. And that's going to be relevant
to this
conversation. So really the perfect guest. Lee, welcome back to the show.
Thank you, Tracy and Joe. Good to be back.
Maybe just to begin, can you sort of set out the scene of the creditors and the debt that Venezuela actually owes? Who owns those bonds and how much debt are we talking about?
In total, probably now, the Venezuelan debt is someplace between 150 and 170 billion. Not all of that is bonds, and that's one of the issues that we should discuss. The bonds that we're talking about are principally Republic of Venezuela and PDVSA bonds, roughly split 50-50. They were issued during the Chavez and early Maduro periods. They went into default, all of them, in the fall of 2017. You remember Mr. Trump in his first term imposed sanctions on Venezuela in August of 2017. The response was to have the bonds go into default, and they have remained in default since then.
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