It’s Official: Venezuela Declared In Default

Last week the rumors were that Venezuela made it’s debt payment. This week we know that Venezuela is declared in default. Here’s the details…

from Zero Hedge

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.

Here’s the full statement:

ALL DEPOSITORIES, NOMINEES, BROKERS AND OTHERS:

PLEASE FACILITATE THE TRANSMISSION OF THIS NOTICE

TO ALL BENEFICIAL OWNERS. ADDITIONAL COPIES OF

THIS NOTICE ARE AVAILABLE FOR THIS PURPOSE UPON

REQUEST AT THE ADDRESS SET FORTH BELOW.

 

NOTICE OF DEFAULT

TO THE HOLDERS OF

$650,000,000 8.50% Senior Notes Due 2018

of

C.A. LA ELECTRICIDAD DE CARACAS (WITH NATIONAL ELECTRICITY

CORPORATION, S.A. (CORPOELEC) AS SUCCESSOR BY MERGER)

 

Common Code 035652116

ISIN No. XS03565211601

 

THIS NOTICE CONTAINS IMPORTANT INFORMATION THAT IS OF INTEREST TO THE REGISTERED AND

BENEFICIAL OWNERS OF THE SUBJECT SECURITIES. IF APPLICABLE, ALL DEPOSITORIES,

CUSTODIANS, AND OTHER INTERMEDIARIES RECEIVING THIS NOTICE ARE REQUESTED TO EXPEDITE

RE-TRANSMITTAL TO BENEFICIAL OWNERS OF THE SECURITIES IN A TIMELY MANNER.

 

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.

 

 

1

No representation is made as to the accuracy of such numbers, either as printed on the Notes or as contained in this notice.

 

Pursuant to Section 5.1(m) of the Indenture, the Holders of more than 50% in aggregate principal

amount of the Outstanding Notes shall have the right to direct the Trustee as to the time, method, and

place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or

power conferred on the Trustee, with respect to the Notes. Pursuant to Section 7.1(b)(F) of the Indenture,

the Trustee is under no obligation to expend or risk its own funds or otherwise incur any financial liability

in the performance of any of its duties or in the exercise of any of its rights or powers if it has reasonable

grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is

not reasonably assured to it. You are hereby notified that the Trustee will take no further action under

the Indenture, except in its sole and absolute discretion, without direction and indemnity, satisfactory

to the Trustee, from the Required Holders of the Notes.

 

Holders of the Notes who wish to communicate with the Trustee or did not receive a copy of this

communication directly from the Trustee and who wish to receive further communications at an address

other than the address to which this notice was delivered should contact the Trustee in writing at the

following address:

 

Wilmington Trust, National Association, as Trustee

Attn: John T. Needham, Jr.

1100 North Market Street

Wilmington, Delaware 19890-1615

 

This notice is provided for informational purposes only. The Trustee gives no legal, financial or

tax advice regarding the Notes or the matters described herein. Holders of the Notes should consult their

own professionals regarding the Notes.

 

 

Dated: November 10, 2017                           By: WILMINGTON TRUST, NATIONAL

ASSOCIATION, as Trustee