A very risky deal with a huge yield.
It didn’t take long for sparks to fly after the Wall Street Journal reported on Sunday that, ‘according to five people familiar with the transaction,’ the asset management division of Goldman Sachs had bought Venezuelan bonds with a face value of $2.8 billion from the Central Bank of Venezuela that it had held as part of its international reserves.
The sale of the bonds – issued by state-owned oil company Petrleos de Venezuela S. A. (PDVSA) in 2014 and due in 2022 – was completed on Thursday, according to the sources. That day and on Friday, the central bank’s international reserves jumped by $749 million, to around $10.86 billion, Reuters reported today. According to Reuters’s sources, including one at Goldman – oh my, all these leaks – the negotiations took place via middlemen in Europe.
This cash, as the Wall Street Journal put it, is ‘a lifeline to President Nicols Maduro’s embattled government as it scrambles to raise funds in the midst of widening civil unrest.’ The Journal describers the economic and social situation the Maduro regime is presiding over this way:
Mr. Maduro’s increasing authoritarianism coupled with critical food and medicine shortages have spawned two months of almost-daily street demonstrations, costing at least 60 lives. The economy is also suffering, having shrunk 27% since 2013. Venezuela is saddled with what the International Monetary Fund estimates will be an inflation rate of 720% this year.
This post was published at Wolf Street on May 29, 2017.