Venezuelan bond rally produces gains for investors after US intervention

After US intervention in Venezuela, prices of Venezuelan and PDVSA bonds rose sharply, and some investors who bought those bonds when they traded at deep discounts have reported gains. Analysts say any debt restructuring will be complex and could take years.

US actions in Venezuela coincided with a strong rebound in the prices of sovereign and PDVSA bonds, producing notable gains for investors who had bought them when values were very low. The country’s bonds had traded at steep discounts after a 2017 default, and recent developments prompted a further rally that lifted many positions. The article reports that hedge funds and asset managers that built positions at low prices have benefited from the move. Analysts warn the path to recoveries is complicated by legal, sanction and creditor-fragmentation issues. Key facts: - Bond prices rose from deep discounts (as low as about 16 cents on the dollar a year ago) to around 40 cents on the dollar after recent US actions. - The article mentions London-based hedge funds Broad Reach and Winterbrook Capital, asset managers Allianz Global Investors and RBC BlueBay, and UK-listed fund manager Ashmore as among those seeing gains. - Winterbrook is reported to advise and manage roughly $220m in Venezuelan assets, and Broad Reach is described as an emerging markets specialist with about $2bn in assets. - Citi analysts are quoted saying a debt restructuring would require a "multi-track, multi-year settlement framework" and could be exceptionally complex. Summary: The market reaction has produced near-term gains for investors who bought Venezuelan sovereign and PDVSA debt at distressed prices. The longer-term outcome depends on a complex restructuring process and related legal and sanction issues. Undetermined at this time.