Venezuela Officially Declared In Default

Tyler Durden's picture

Today at 11am, the ISDA Determinations Committee sits down to decide whether an event of default has occurred due to the delayed principal payment on the Petroleos de Venezuela SA, or PDVSA, bond that matured Nov. 2, in the process triggering PDVSA (and perhaps Venezuela) CDS, and officially declaring Venezuela in default.

We won't have to wait that long: moments ago, Wilmington Trust, the Trustee of the 8.5% bonds due 2018, issued by Corpoelec, Venezuela's electricity company, declared that the missed interest payment originally due October 10, and whose 30 day grace period expired on November 9, and for which no pament was sent or received, officially constitutes an event of default.

From Bloomberg:

From the statement:

Wilmington Trust, National Association is communicating the following to you in its capacity as successor trustee (the “Trustee”) to The Bank of New York, as trustee, under the Indenture dated as of April 10, 2008 (the “Indenture”) for the $650,000,000 8.50% Senior Notes due 2018 (the “Notes”) of C.A. La Electricidad de Caracas (the “Issuer”). In a letter to the Trustee and various other parties dated November 30, 2012, National Electricity Corporation, S.A. (CORPOELEC) advised that it is the successor by merger to the Issuer. Capitalized terms used herein but not defined herein shall have the respective meanings set forth in the Indenture.


Please be advised that the Paying Agent with respect to the Notes has advised the Trustee that the payment of interest on the Notes that was due on October 10, 2017 was not received by the Paying Agent. The Issuer’s failure to pay interest on the Notes when due on October 10, 2017 constitutes a Default under the Indenture. The Paying Agent has further notified the Trustee that the interest payment was not received by November 9, 2017.


The Issuer’s failure to pay the overdue interest on the Notes on or before November 9, 2017 constitutes an Event of Default under Section 5.1(ii) of the Indenture. Pursuant to Section 5.1(b) of the Indenture, if an Event of Default shall occur and be continuing and has not been waived, the Holders of at least 25% in principal amount of Outstanding Notes may declare the principal of, and premium, if any, accrued interest and Additional Amounts, if any, on all the Notes to be due and payable by notice in writing to the Issuer and the Trustee specifying the Event of Default and that such notice is a “notice of acceleration”, and the same shall become immediately due and payable.

It is unclear if this formal default declaration makes today's ISDA determinations committee decision moot, however it now looks quite certain that Monday's meeting between creditors and the country's vice president and chief debt negotiatior, who also happens to be a US-sanctioned drug kingpin, will no longer be necessary.

Today's news will not come as a surprise to CDS holders, who had already priced in a 99.99% probability of default in 5 years.

The full statement is below:

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asscannon101's picture

The Greeks will float them a few Euro until payday...

SillySalesmanQuestion's picture

Maybe the FED will loan them their printing press...

Akzed's picture

Maduro should take a loan on his 401(k).

VladLenin's picture

I heard PDVSA wrote them a check, but just asked it be held until the end of the month.

jamesmmu's picture

this is the last stage of socialism

truthseeker69's picture

Who in their right mind keeps loaning money to Venezuela?  Fucking morons are now left with a bag of shit. 


On the other hand, Maduro and his cronies are done - unless the Ruskies or the Chinks step in. 

secretargentman's picture

Who? Fvckers who think Uncle Scam will bail them out 'cause they're too big to fail. That's who. 

rf80412's picture

Who in their right mind keeps loaning money to Venezuela?

Investors seeking yield, that's who.  Bonds yielding near-zero aren't good investments from their POV.  They want income, dammit.

Akzed's picture

The reason to lend money to cash-poor entities is because you want their non-cash.

Lucky Leprachaun's picture

Because time and again the US Govt. has bailed them out. Doing it again with Puerto Rico.

Watson's picture

Sherlock Holmes story 'The Stockbrokers Clerk'.

The clerk concerned is in the situation he is because of...a failed Venezuelan loan.
Story was published in the 1890's.


Mike Masr's picture

Time for the US to meddle and interfere with a good ole fashioned neocon regime change.

Where is Vicki Nuland and Geoffrey Pyatt when you need them? (sarc)

chubbar's picture

Pretty sure an 8.5% bond was going to default at some point. Wonder what the CDS picture looks like? Any chance this could be a snowflake that starts an avalanche?

rf80412's picture

Debt is an income-producing asset to those who own it.  Default makes that asset, and the income derived from it, go poof.  Other debt instruments - also income-producing assets - are leveraged off the original [sovereign] debt.  They go poof too.  Bank stocks take a hit, as would any other company had suddenly had a big hole blown in its revenues.

LawsofPhysics's picture

Correct, but then again, you are assuming an honest "mark to market" accounting model and just rule of law.

I don't think we have that anywhere anymore...

JLee2027's picture

Considering the timing and the Deep State condition, yes.


Pretty sure an 8.5% bond was going to default at some point. Wonder what the CDS picture looks like? Any chance this could be a snowflake that starts an avalanche?

Lord Raglan's picture

We should have as much courage.........

lasvegaspersona's picture

Wonder how many side bets there were....anyone here try to get in on the CDS racket?

Who pays those off? Who do those folks owe money to? When does this train leave the station?

One of these days some trivial miss on a measley $650M bond coulld cause some real headaches.

Getting Old Sucks's picture

Could be 650B the way the CDS market works.  Watch what happens to the entire market because of this.  Even worse, if the holders default, everything will tank.  210 T.

ToSoft4Truth's picture

Is the Saudi Prince money wallpapering this default?

coast1's picture

can somebody give me a good place to go to to buy bitcoin cash?  Damn it seems so complicated..And I read that if you owned bitcoin, you own bitcoin cash too?  So if bitcoin went down and botcoin cash went up, you broke even?  Everything is so confusing...

Yellow_Snow's picture


Don't buy at these prices...

coast1's picture

bitcoin cash is $805 but they want $250 as a fee?  That is much more than paying over spot price for

ParticularlyStupidHumanoid's picture

If it's not Bitcoin, it's a shitcoin.

Yellow_Snow's picture

Default = bond rally !!!

in the new paradigm...

BritBob's picture

He'll blame the Gingo's.


Nicolas Maduro has been an avid supporter Falklands claim even speaking in CELAC on behalf of Argentina. What is the strength of the Argentina sovereignty claim? And what about the rights of the islanders?


MrSteve's picture

Bob, Bob, Bob....Gingo is what, a lost tribe in the Amazon or the Lower Upanishads?? There's ginkgo biloba trees and gringo Norte Americanos... gin go is what you've been drinking. Stay off ZH until you get right with the bottle!

CHoward's picture

Oh no...are we all going to die?!?

Number 9's picture

on a long enough tmeline

rf80412's picture

The main reason why people don't have the patience for economies to self-regulate.  Recessions and depressions and structural changes that take decades to unfold can leave countless ruined and simply wasted lives in their wake.

And when the response from the powers that be (both in the boardroom and in Congress) is "You can't fight the future! Create your own opportunities, you weak stupid losers!", that doesn't actually inspire anyone, but instead fills them with resentment and dread.

Number 9's picture

the parasites took over the power to create the money in usa in 1913.. in  1929 they dried up the money supply and purposely ushered in the great depression and starved to death somewhere in the neighborhood of 7 million Americans..

and so it goes, look around ..starving people in ruined countries ala  parasitic reptilians..

dont even think for one minute it is not by design and just a coincidence..

the whole world lies in the grasp of the wicked one..


Nightjar's picture


rf80412's picture

Argentina defaulted and after a few hard years, they are or were doing better than ever.  The point is that they were able to grow without every spare peso going to their creditors.  Political stability returned because "your" government is once again allowing itself to spend money on you and is no longer reduced to being a collection agency for international banks.  Tax cutting to the bone and beyond and fire sales of government assets ended or were avoided, interrupting a self-defeating cycle of the government actively depriving itself of revenue.

taketheredpill's picture

As opposed to Greece which did not default....

JibjeResearch's picture

What's going on in Venezuela?

abgary1's picture

A strict adherence to Socialism.


MrSteve's picture

Citizen weight loss and politician fat catting, same as it ever is.

freedom1798's picture

Nothing anybody can do if a nation defaults, short of invading and confiscating property.  Nobody wants to invade Venezuela and deal with that hell-hole.   Bond holders get to eat shit.  I guess that 80% (or whatever) interest rate wasn't worth it.

rf80412's picture

One thing that sovereigns still have over international finance.

Smart owners of assets have a vested interest in the long-term health and productivity of those assets.  Parasites following a smash-and-grab logic are always in danger of going down with their hosts, which is part of why they demand high yields (i.e. high rates of short-term returns): they know their "business" model is unsustainable.

effendi's picture

Don't have to invade and confiscate property, just sieze any and all cargoes going out (like oil) and any payments made to import goods (food, medicine, TP etc). Then Maduro and his cronies can marinate in their socialist shit. They chose to borrow to fund their socialist utopia and now they find that they have run out of other peoples money (to borrow).

Akzed's picture

"You can just pump that oil straight into our tankers all lined up here so nicely. Thanks."

Dead Indiana Sky's picture

Too bad they don't have a printer.

BitchesBetterRecognize's picture

they do have the Bolivar printer - It happens it ran out of ink


They could ask the US to print somes notes but the US is already burning out their printer motors.

jamesmmu's picture

BTC Update 2017-11-09 - "When markets sell off on good news..." Run, don't walk.


Seasmoke's picture

Has a CDS ever paid out a penny, ever ????? LOL