Venezuela, PDVSA CDS Triggered: ISDA Says Credit Event Has Occured

Tyler Durden's picture

In a long overdue, and not exactly surprising decision, moments ago the ISDA Determination Committee decided, after punting for three days in a row, that a Failure to Pay Credit Event has occured with respect to both the Bolivarian Republic of Venezuela as well as Petroleos de Venezuela, S.A.

Specifically, in today's determination, in response to the question whether a "Failure to Pay Credit Event occurred with respect to Petroleos de Venezuela, S.A.?" ISDA said that the Determinations Committee voted 15 to 0 that a failure to pay credit event had occurred with respect to PDVSA.

ISDA said the DC also voted 15 to 0 that date of credit event was Nov. 13 and that the potential failure to pay occurred on Oct. 12. ISDA also announced that the DC agreed to reconvene Nov. 20 to continue talks regarding the CDS auction, now that the Credit Default Swaps have been triggered.

Over the past week, all three rating agencies, with Fitch Ratings most recently, declared PDVSA in default, citing the state oil company’s repeated payment delays. The oil company failed to pay yet another $80 million in interest that was due in mid-October on bonds maturing in 2027, and whose buffer period expired over the weekend. Venezuela was declared in default by S&P Global ratings for a similar issue. According to Bloomberg, Fitch said that it expects PDVSA’s creditors to recover as little as 31 percent on their investment.

The panel will now meet next week to discuss whether to hold an auction to set the rate at which the CDS will pay out. When credit swaps are triggered, buyers of the contracts have their losses covered by the counterparties that sold them the insurance-like derivatives.

As recently as last month, traders had bought a net $250 million of default protection through the swaps market, according to the ISDA. Of course, with the PDVSA CDS already trading at a price which implied 100% certainty of default, none of this will be a surprise.

* * *

And moments after declaring PDVSA CDS triggered by a failure to pay event, the ISDA Americas DC also found that an identical Failure to Pay Credit Event had occurred with respect to Bolivarian Republic of Venezuela.  The Determinations Committee voted 15 to 0 that a failure to pay credit event had occurred with respect to Venezuela, and added that the Determinations Committee voted 15 to 0 to reconvene Nov. 20 to continue talks on an auction.

Just like with PDVSA, the CDS triggering has been fully priced in.

The only question now is when the CDS auction will be, whether it will proceed smoothly and who is revealed as the biggest seller of Venezuela and PDVSA CDS.

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hedgeless_horseman's picture


The problem with socialism is that you eventually run out of other people's pay other peoples money.

cossack55's picture

Fuck ISDA, IMF, BIS and The Fed

Richard Chesler's picture

"who is revealed as the biggest seller of Venezuela and PDVSA CDS"

Goldman Sachs?

Urban Roman's picture

... and Gartman goes long tomorrow.

Conscious Reviver's picture

Finally ... a credit event. Now let's see some cascading derivative action.

peddling-fiction's picture

The problem with any rigged ism is that you eventually run out of other people's pay other peoples money.

Synoia's picture

And US sanctions caused none of this, correct?

peddling-fiction's picture

"And US sanctions caused none of this, correct?"


Conscious Reviver's picture

Oh the humanity. Send them some toilet paper.

peddling-fiction's picture

Save it. It might come handy soon.

chubbar's picture

Well, thanks captain obvious! Yes, a failure to pay a debt actually is a default, imagine that! Christ, how much are these asshats being paid for such insights? Of course all the offsides CDS have long been covered by the central bankers so this is really just a nothing burger. Carry on.

any_mouse's picture

Isn't every nation operating on debt (OPM) now?

The only GDP expansion is through debt expansion.

Ponzis built on Ponzis.

Would be nice if Central Banking had the attention of the Manmade Global Warmers and it was settled science that Central Banking is a threat to the Planet.

What if Yellowstone blows? Panic mode.

Ask instead what happens when the Debt Bubble blows? Crickets.

natxlaw's picture

Don's on me that Maduro would have been in a better position had he used   the non-acceptance of US dollars as a bargaining chip to get China and Russia to write down their debt.Oh well I'm certain they will give him as good a deal as they would have. After all, the last thing they want is regime change.

peddling-fiction's picture

"After all, the last thing they want is regime change."

The DC Regime?


just the tip's picture

what would a DC regime change accomplish?

wall street regime change.

no chuckle.

taketheredpill's picture




dirty fingernails's picture

Greece behave like good little bitches. Grovel and Ms Merkel will scratch your tummy. No red rocket! Bad!

jamesmmu's picture

WOW, CDS triggered. Will CDS market shine again?

natxlaw's picture

So it begins. Did they back the CDS with cash,  or another CDS?

lincolnsteffens's picture

Hypothicated CDS and then re-hypothicated to infinity. After all it is just Monopoly money, not real money.

buzzsaw99's picture

the only time cds pays off is when the squid buys them.  this whole thing reeks of squid six ways to sunday.  a credit event does not officially happen unless they stand to profit from it.

cossack55's picture

Look at the fucking voting list, looks like at pedophilia parlor

buzzsaw99's picture

hell it doesn't even matter if the squid buys cds from firms that go bankrupt.  remember blankfein testimony in front of congress in 2009?  He said something like:  "well, if the gubbermint doesn't give us the ten billion dollars emergency cash then the insurance would pay us $10B..." (the bank holding company, barf)  implying that all the firms they bought cds from weren't fucking insolvent too the lying rat bastard.  Never mind that goldman illegally bought venezuela bonds in the first place, and that for pennies on the dollar, which the imf would have collected full value if the fucking thing hadn't gone tits up.

Rainman's picture

Was it Uncle Warren who said when the tide goes out you find out which counterparties are swimming naked ?

James T. Kirk's picture

That is so old school. Here are the new rules:

No one is naked when the tide goes out.

Instead of just continually printing money, continually invent new kinds of financial instruments every few weeks. If no one can figure out and keep abreast of the how the new financial instruments actually work (ie: no one can figure out how they simply keep re-defining debt, thus continually putting new clothes on the emperor), no one panics, market volatility goes to zero, and life goes on normally. Until it doesn’t. When trust in fiat money breaks, it will literally take a supernatural event to restore order to the earth. A not-very-nice supernatural event.

Maximeme Q's picture

Awesome news! This should be good for +150 DOW points at a minimum.

FreeShitter's picture

Call 1-800-OLD-YLLR

auricle's picture

This should cause some gravitational waves in the markets. Some insurers are under deep water over this. Don't think for a minute that vertical line has reached its peak. 

money printing coming.

Question: The Fed says they want to draw down their balance sheet and the easiest part of that is the money they printed but are holding on reserve for the banks. What if a credit crisis hits and that money is then used by those banks before it can be repo'd? How then will the Fed draw down their balance sheet? Much of the defaulted loans in Venezuela are US derived? How much of that is also insured through CDS from US reinsurers like AIG? I smell smoke!

Disgruntled Goat's picture

Reinsurers and traditional insurance firms are generally not sellers of CDS. Banks and other firms with Venezuelan bond exposure might purchase CDS to hedge their position. Sellers of CDS, who must pay upon default,  are financial firms speculating that Venezuela will be able to meet their obligations. 

serotonindumptruck's picture

This is a weak attempt at an end-around by Western governments.

Vlad Putin beat them to the punch with his offer of debt relief.

The 3 billion loan guarantee from Russia is most likely only prolonging the inevitable, but at least Russia has a vested interest in Venezuela's future.

Now, about that Russian naval base in Venezuela...

peddling-fiction's picture

"Now, about that Russian naval base in Venezuela..."

And Cuba.

Stormtrooper's picture

And how about a Russian base in 'Little Cuba- Miami'.

idontcare's picture

The base is actually in Miami Beach, all up and down Collins Av these days. :-O

dirty fingernails's picture

Wouldn't it be hilarious if Venezuela's CDS started the market crash? The US had producers pump to drop the price of oil in order to hurt places like Russia (which has backfired in spectacular DC fashion), and causes a market crash?

buzzsaw99's picture

yeah well don't be too quick to fire up the FAZmobile.

PontifexMaximus's picture

forget it, it‘s a nobrainer story. there will be business as usual. the big players in this venezuela game will sort it out behind the curtain. nothing to see here.

any_mouse's picture

Those bankers will now take over title to Venezuela.

It's not okay to be a socialist nation, unless the bankers still get the prime cuts.

1 Alabama's picture

If this isnt the most ridiculous thing ever concocked by humanoids, I dont know what is.

USA USA's picture

VISA/MC shoiuld wait so long!

Yellow_Snow's picture

I hate to say it... but those that bought the bonds were TOTAL F'ING MORONS...

John_Coltrane's picture

Both sides should review their Hamlet,

"Neither a borrower nor lender be"