Administration
   

beta version
Singapore
07:33 AM
   Tokyo
08:33 AM
   Pattaya
06:33 AM
   Moscow
03:33 AM
   Istanbul
02:33 AM
   Frankfurt
01:33 AM
   London
12:33 AM
   Rio de Janeiro
08:33 PM
   New York
07:33 PM
Memberlogin
Did you forget your password?
Register for a membership!
Click for the CKC Bonds Survey.
       
Discussion Board (Corporates)

 Board

 Write new posting

 Read old postings (archive)

 Read your postings


Last 50 Postings | Last 100 Postings


11-22-19  Alex

Buttgieg


11-21-19  savo

of course you are right amigo... but this election is going to be fought by old people

sanders 78

Bloomberg 77

Biden 77

Trump 73

Warren 70

Nancy Pelosi (from the outside) 79

that is why I like Andy Young....44

11-21-19  amigo-latino

Savo, Chronological age is, not always important.

Biological age is more important , up to a degree, for those who are fit and healthy.

11-21-19  savo

problem... the guy is 77

11-21-19  savo

Former New York City Mayor Michael Bloomberg took another step toward launching a Democratic bid for president on Thursday, filing paperwork with federal election authorities that will allow him to raise money for his campaign.

Bloomberg filed the paperwork with the Federal Election Commission as his political operation continues to work the ground in preparation for a bid.

The billionaire media mogul announced Wednesday that he will spend $15 million to $20 million on a voter registration drive in battleground states to help the Democrats defeat President Trump in the general election.

That’s on top of the $100 million he’s already promised to spend on ads targeting Trump in battleground states.

11-21-19  savo

An Inconvenient Fact: Not all debt requires National Assembly approval
By Claudio Rodríguez - May 8, 2017


You’ve heard it a dozen times by now. Members of the National Assembly keep repeating it. Hell, this blog does too: the government needs approval from the National Assembly to incur in any type of debt.

The government can kick and scream all it wants, but foreign creditors know the score: the regime’s debt deals that are being struck without Assembly approval, from the Fintech repo and all those PDVSA credit transactions, are wide open to legal challenge if the regime falls. I mean, article 312 of the Constitution is pretty clear, right?

The Assembly is already warning honchos in Wall Street not to borrow Venezuela any more money or else. It’s become holy word in the opposition’s political sphere.

It’s strictly politics: bluster from players who know they’re holding a weak hand and are trying to do the best they can with it.

The only problem is, if you have any kind of legal training, you can quickly spot big problems with this argument.

Article 312 in Detail

Let’s take a look at article 312 of the Constitution. At all of it, I mean:

“The law will set the limit of public indebtedness in accordance with a prudent level in relation with the size of the economy, reproductive investment and the capacity to generate income to cover public debt service. Public credit transactions will require, for its validity, a special law authorizing them, except the cases established by framework law (leyes orgánicas). The special law will indicate the types of transactions and will authorize the corresponding budgetary credits in the respective budget law. The annual special indebtedness law will be submitted to the National Assembly jointly with the Budget Law. The State will not recognize any other obligations than those incurred by legitimate bodies of the National Power, pursuant to the law.”

The highlighted bit is the bit that always gets left out of opposition talking points. There are explicit exceptions to Article 312’s principle that all debt must be authorized by law.

Article 150 is an obscure and hardly ever-cited constitutional provision that has been carried over in our constitutions again and again since the 19th century

Constitutions are usually declarations of principles from which it’s hard to extract definitive guidance to help you solve particular cases. That’s why there are laws and regulations. In Venezuela, most dispositions governing public credit are contained in the Ley Orgánica de la Administración Financiera del Sector Público (the Framework Law on the Financial Administration of the Public Sector). Title III of the Law establishes the procedures for public credit transactions, all the approvals and the procedures that must be followed when the Republic directly enters into public credit transactions.

Now, let’s take a look at article 101 of the Law:

“Title III…

…..Article 101. The following are exempted from this Title:

The Venezuelan Central Bank El Banco Central de Venezuela.
The Banco de Desarrollo Económico y Social de Venezuela (BANDES).
State-owned corporations dedicated to financial and insurance intermediation, governed by the Banking Sector Institutions Law and those governed by the Insurance and Reinsurance Companies Law.
The corporations created or to be created pursuant to the Organic Hydrocarbons Law or those created or to be created pursuant to article 10 of the Decree N° 580 dated November 26. 1974, by which it was reserved to the State the industry of the production of the iron mineral…”
In other words, Article 101 fleshes out the exception established in the constitution’s article 312. Entities excluded from the authorization requirement include BCV, companies created under the Hydrocarbons Law, BANDES, public banks, public insurance companies and iron and steel companies. None of these entities need authorization from the Assembly to incur debt. And their credit transactions don’t need to be included in the annual indebtedness law (ley paraguas).

But you are probably thinking now that this article was rammed through the unconstitutional enabling law of 2015? It wasn’t, it has existed even before chavismo was a thing.

Find any PDVSA or BCV financing deal that was approved as a public interest contract by the National Assembly at any point between 1830 and 2017.

Neither PDVSA nor Banco Central have ever requested or gotten authorization from the National Assembly to incur debt. Try to look up any approval from the Assembly for the issuance of Venny bonds, you won’t find them, they don’t exist because they’ve never been required.

My guess is that this exception was carved out to protect what was seen as technically sound, smooth-functioning institutions during the cuarta from political meddling by Congress in their operations.

Article 150 is no Better

The Assembly also cites article 150 of the Constitution to say that because these contracts amount to public interest contracts, the financings need AN approval:

“Article 150. The entering into of national public interest contracts will require the approval of the National Assembly in the cases determined by law.

No municipal, state, or national public interest contract can be entered into with States or foreign official entities or with companies not domiciled in Venezuela, not being assigned to them without the approval of the National Assembly.

The law may require in public interest contracts certain conditions of nationality, domicile or any other kind, or require special guarantees.”

Article 150 is an obscure and hardly ever-cited constitutional provision that has been carried over in our constitutions again and again since the 19th century, even though there’s little case law developing it. I don’t mean to get into a legal history lesson, but I challenge you to find any PDVSA or BCV financing deal that was approved as a public interest contract by the National Assembly at any point between 1830 and 2017. You won’t find them either.

The Correa Gambit

OK, so maybe under Venezuelan law it was all legal in some narrow, technical sense. It still shouldn’t count. After all, it was contracted by a dictatorial government, the very definition of “odious debt” any new government is entitled to disregard, right?

Well, odious debt is a dubious legal theory that originated during the peace negotiations after the Spanish-American War which is not recognized under international law. It has been used recently by lefties such as Rafael Correa as an argument to get out of paying foreign debt contracted by previous governments.

Do you really think the wisest thing we can do know is try to ñángara our way out of the mess chavismo left by quoting non-sense from freaking Rafael Correa before the foreign court that hears any dispute about the financings? This is just not what a serious government trying to solve the external debt mess left by irresponsible populist does.

Neither PDVSA nor Banco Central have ever requested or gotten authorization from the National Assembly to incur debt.

Look, I understand where the Assembly is coming from and I commend them for doing all they can to make life hell for the government. But it’s strictly politics: bluster from players who know they’re holding a weak hand and are trying to do the best they can with it.

The truth is that Venezuela right now is a devastated economy that produces almost nothing and spends a big portion of the cash it receives on servicing debts that never should have been taken on. The solution to this is assistance from multilateral institutions and attracting foreign investment by protecting property rights, economic liberties and reestablishing the rule of law. This will be carried out by a serious, market-friendly, well-advised, technically-sound new government that knows better than to misread the Constitution or to rely on flimsy legal theories to weasel out of paying our debts.

https://www.caracaschronicles.com/2017/05/08/inconvenient-fact-not-debt-requires-national-assembly-approval/

11-21-19  savo

11/21/2019

The PDVSA 2020 bond: time for a solution
NOVEMBER 18 2019 11:57 AM
By:
Dr. Arturo C. Porzecanski, a distinguished economist in residence at the American University, is an expert in international finance and sovereign debt issues. He was formerly chief emerging-markets economist at various major banks in New York.

In this post, he argues that, rather than litigating, bondholders and the Guaidó administration, should now sit down and negotiate a reprofiling of the PDVSA 2020 bond.

Venezuela’s default on over $60bn (https://joi.pm-research.com/content/27/3/37) of
government bonds sold around the globe turns two years old this month – the most protracted sovereign default of the past two decades, but for Argentina’s default in late 2001. It has now widened to encompass (https://www.bloomberg.com/news/articles/2019-10-28/venezuela-defaults-on-its-last-bond-setting-up-legal-showdown) even the PDVSA 2020 – the collateralised bond issued by state oil company PDVSA – amortising notes, of which $3.4bn were issued in late 2016. A $913m payment of principal and interest is overdue since October 28.

This was the government’s last performing dollar bond, and it is notable because it was backed like no other by very desirable collateral: a controlling (50.1 percent) stake in Venezuela’s most important asset abroad, the Houston-based refiner Citgo, which if auctioned off could fetch (https://www.houstonchronicle.com/business/energy/articl e/CITGO-13261273.php) $4-8bn.

President Nicolás Maduro serviced the PDVSA 2020 bond throughout 2017-18 because he feared the political repercussions of losing what Venezuelans consider to be a “crown jewel” in a vast field of badly managed state-owned enterprises. For the same reason, he has also honoured (https://oilprice.com/Latest-Energy-News/World-News/Russias-Ro sneft-Says-Venezuelas-PDVSA-Still-Owes-It-23B.html) a loan from the Russian energy giant Rosneft, to whom Maduro pledged the remaining stake in Citgo as collateral.

Earlier this year, interim president Juan Guaidó appointed shadow administrative boards for Citgo and PDVSA. Those are recognised by the US government – and thus US courts – as legitimate bodies with authority over the companies’ affairs.
Running Citgo in this manner is feasible because it operates wholly in the United States, and thus out of Maduro’s reach. However, PDVSA’s parallel board exercises only fictional control, because its directors are in exile while most of the company’s assets are in Venezuela, operating under Maduro’s thumb.

Most importantly, Guaidó’s representatives have no access to Venezuela’s oil export earnings. The proceeds still flow to Caracas and sustain the Maduro regime, having been successfully diverted through Russian (https://www.bloomberg.com/news/article s/2018-10-25/venezuela-taps-russian-bank-to-work-around-crippling-sanctions) and other foreign banks, and also courtesy of Rosneft (https://www.reuters.com/article/us- venezuela-politics-rosneft-exclusive/exclusive-venezuela-skirts-u-s-sanctions-by-funne ling-oil-sales-via-russia-idUSKCN1RU2A4), to bypass otherwise crippling US sanctions.

Guaidó’s side has access to Citgo’s cash and to certain Venezuelan government funds blocked in US bank accounts. They enabled Guaidó to make a payment (https://www.f t.com/content/0dfb740a-ba05-11e9-8a88-aa6628ac896c) of $71m to cover last April’s coupon on the 2020 bond – because he too is loath to surrender Citgo to its creditors, lest he lose political support back home. However, coming up with $913m to cover principal and interest due on October 28 was a very tall order.

The only reason why bondholders have not already exercised their rights to Citgo is because, four days earlier, the Trump administration amended (https://www.treasury.gov/resource-center/sanctions/Programs/Documents/venezuela_gl5a.pdf) US Treasury sanctions on Venezuela to order a postponement of all dealings related to the PDVSA 2020 bond until January 22. Mr Guaidó’s representatives in Washington had lobbied (h ttps://www.ft.com/content/5f5e070a-f6a4-11e9-a79c-bc9acae3b654) the US government heavily for some such protective measure.

Guaidó decides to play offense

Rather than sitting down and negotiating with the bondholders, however, on October 29 Guaidó’s team filed a lawsuit (https://www.ft.com/content/13681f2a-faa0-11e9-a35 4-36acbbb0d9b6) in US federal court on behalf of PDVSA, and against the 2020 bond trustee and collateral agent (Union Bank and GLAS Americas, respectively). It seeks a judgment that the bond’s indenture should be annulled and declared unenforceable, thereby barring any exercise rights on the Citgo collateral.

The argument put forth is that, because in 2016 President Maduro failed to submit the proposed indenture for consideration by the opposition-controlled legislature (the National Assembly), the indenture and its security agreement are invalid. Moreover, it is claimed that investors should have avoided the bonds because the Assembly had adopted a resolution publicly denouncing the transaction then in motion.

The Guaidó litigation recalls the old legal doctrine of “odious debt”. It argues (https://w ww.imf.org/external/pubs/ft/fandd/2002/06/kremer.htm) that sovereign debt incurred without the consent of the people, and not benefiting the people, should not be transferable to a successor government, especially if creditors are aware of these facts ahead of time. However, notwithstanding the passage of almost a century since it was first articulated, this doctrine has gained zero traction within the international legal community, despite the many instances of corrupt despots whose legacies of indebtedness could have been challenged.

The lawsuit is a Hail Mary pass (https://en.wikipedia.org/wiki/Hail_Mary_pass).

First, the PDVSA 2020 transaction did not raise any new funding for the Maduro regime to misuse; it merely refinanced (https://www.ft.com/content/e5298570-9a96-11e6-8f9b- 70e3cabccfae) large payments coming due that could not be met.

Second, PDVSA has never (https://www.caracaschronicles.com/2017/05/08/inconvenient-fact-not-debt-re quires-national-assembly-approval/) requested authorisation from the National Assembly to incur debt, so what transpired was business as usual.

Third, US legal precedents suggest (https://www.creditslips.org/creditslips/2019/10/a- mini-qa-on-venezuelas-possible-defense-to-foreclosure-on-the-pdvsa-2020.html#mor e) that when a government expressly represents that a bond is properly authorised, investors are entitled to rely on that representation. And to recall, the bond is subject to New York law, not Venezuelan law. Fourth, earlier this year the National Assembly voted unanimously (https://www.bloomberg.com/news/articles/2019-05-07/venezuela-opposition-congress-approves-pdvsa-2020-bond-payment-jve2ncva) to make the aforementioned coupon payment, thereby legitimising the obligation it had denounced in 2016.

Time to solve the underlying problem

The countdown to January 22 has begun, and thus time is of the essence. It is
exceedingly unlikely (https://www.law360.com/articles/1218298/venezuela-won-t-pre vail-in-bid-to-nix-2020-bonds-court-told) that a court judgment – never mind a ruling in Guaidó’s favour – will be rendered before then. And even if it is, a lengthy appeal process is likely to follow.

Come mid-January, the Trump administration might or might not be persuaded to extend the current freeze on transactions related to the PDVSA 2020 bond. But even if it does grant an extension, that will only postpone, rather than solve, the impasse between bondholders and PDVSA.

There is a realistic risk that the US Treasury will lift the prohibition on the said transactions. One reason is that there is growing resistance (https://www.ft.com/conte nt/948ad9d6-f022-11e9-ad1e-4367d8281195) on Wall Street and in conservative circles to the US government’s running roughshod over investor rights and lawful contracts. Another is the September ouster of John Bolton from the White House, because the national security adviser reportedly was (https://www.nytimes.com/2019/10/08/opini on/john-bolton-maduro.html) the loudest advocate of unseating President Maduro.

Therefore, it behoves both sides in the dispute – bondholders and Guaidó’s representatives – to start an earnest negotiation process to solve the underlying problem, which is PDVSA’s current incapacity to meet the contractual terms of the 2020 bonds. And since it is impossible to assess PDVSA’s future ability to meet its financial obligations, particularly given dwindling oil production (https://www.bloomb erg.com/news/articles/2019-10-03/venezuela-cuts-oil-production-from-orinoco-belt-a s-tanks-fill) in Venezuela, an agreed postponement of the remaining principal repayments is probably a good first step.

It makes sense for Venezuela to spare at least one bond from protracted default and steep investor losses. While it will be tough for PDVSA to eventually regain access to the international capital markets, its re-entry will be greatly facilitated if investors can recall that at least one collateralised obligation was treated with the respect and seniority it deserved.

11-21-19  savo

carib.. we are talking about different things.. if Warren wants to turn the US into a very high tax country on the argument that she knows better how to spend the money I doubt she will have any appeal with the US voter.

If she is talking about a "windfall" wealth tax on the ultra rich by interest rate subsidy then I think she might have appeal. Windfall meaning one-off.

Similar to the windfall tax Blair/Brown put on the utilities privatized by the Tories (it seemed at a price too low)...which went up in market value several fold soon after being privatized.




11-21-19  carib

PS: on the 2020 US elections.. I do not make a forecast, but I say the outcome is still open. I would not support Trump.. but anyway I do not vote.

:-)

11-21-19  carib

Savo: I am one of the probably few non-socialists who took the time to read both big books by Piketty (capital in the XXI century and the ideology of capital.. some 2400 pages in total).. and the first reaction was: "the guy has a point!" (in arguing for a wealth tax)
But then, when I discovered this aspirant "new Marx".. not only wants to tax big wealth.. but also put higher income taxes on anyone earning more than 200K gross.. I concluded:
the fellow is dangerous, but nutty.
Piketty got a lot of copycats.. and Warren is sadly one.
The concept of a wealth tax on billionaires.. is legitimate, and probably popular.
99,99% of voters are not billionaires, and not likely to expect to become billionaires.
But then Warren goes on with a plan to socialise medical costs.. putting an additional income tax of 15%.. on people earning over 250K$ gross.
This means a fellow living in NY city, and already paying about 50% in taxes (between federal, state and city).. would have to pay much more than that.. to pay for a health system costing twice(or more) its fair value.
This is not a tax on billionaires.. but more tax on the middle class.. or those hoping to become middle class.
Sorry, I could not vote for that, after reading the details of the programme.

11-21-19  savo

pana.. warren is a symbolic name...whoever pushes forward the argument...will that argument change the political landscape...

I think it might... in any case I do not make forecasts about elections in the US.. we have already professional colores forecasters... from landslides to whatever... i am less certain.

11-21-19  panasonic

Savo, I may be wrong...tax the rich won't work next year,
forget Warren...she is falling behind after talking wealth tax,
she doesn't click with the poor nor middle class, screwed big
time attacking the rich

in 4 years story will be different, AOC connects with lower
income class


11-21-19  savo

pana.. this is not about the rich vs the poor... or making poor people less poor...because of making the rich less rich.. it does not work that way...

We are talking about electoral politics... and the argument that those that benefited from the bail outs of 2008 and the interest rate subsidy since QE which allow massive buy backs are asked to give back a significant share of the pie..and by significant i mean several trillions... so it is not a meaningful argument.

Not one I would support... simply one that is being used by the Warren camp and that carib dismissed... when others... might think is the exact political offer that could make Warren president.

The argument will probably be the money will be used for better infrastructure.. transportation..health..security... schools... the elderly..te invironment... you name it...

will it bring voters to the democrat camp?...given how the popular vote in 2016 and 2018.. and in every other election estate.. municipal.. etc... since 2016... is looks as if it will.

11-21-19  panasonic

Bond, only talking of auction on the C-band is enough ground
to file...

11-21-19  bond


intelsat bonds melted, we are in a mine field...
...................
I do not follow them anymore, bought in 50s and sold in 70s. I have enough HY, so new entry is not planned.

From what I read the C-Band is the reason of the decline:

Intelsat SA bonds extended a week-long slump as Sen. John Kennedy (R-La.) renewed his push for a public auction of C-Band wireless spectrum. Others signaled little concern over Kennedy’s efforts, with Height Capital saying legislation forcing a public auction isn’t “passable at this point.”

Co.’s 8.125% bonds maturing in 2023 fall as much as 6.75 cents on the dollar to 63.5 cents; they’ve plunged 20 cents this week, Trace prices show
The debt is trading at the lowest level since May 2018, yielding more than 20%.
Co. 5.5% notes due 2023 dropped 1.75 cents on the dollar to 89
The company has more than 14 billion of debt outstanding and is relying on potential proceeds from an auction of its C-Band spectrum for wireless use to reduce leverage

11-21-19  panasonic

rich can (and will) move when needed.... 97% chance that a poor
family without credit will stay poor and big % of middle class
with no access to cheap credit will end poor as well...

https://www.yahoo.com/finance/news/world-rich-rattled-looking-old-050006630.html

11-21-19  panasonic

Savo, yep but same subsidy is somehow
equitative in USA, rich get more rich
but poor have an opportunity to climb
in the ladder.

Warren losing steam from what me read.

Socialist USA and we'll do better saving
in CH even at minus 5% interest rate.

11-21-19  savo

pana.. my comment was about how a windfall wealth tax on the mega rich who multiplied their riches thanks to share buy backs with money borrowed at subsidized interest rates can have an appeal on the majority of voters who has not benefited...

...I have no idea whether this will be good or bad for the US economy.

So do not rule out Warren on of that policy because it may be the exact policy the one that brings her to the WH.

11-21-19  Alex

Sanders, Warren are guaranteed victories for Donald.


Only Bloomberg has a Chance if the dumbocraps nominate him.


11-21-19  panasonic

Savo, a socialist USA is not sure thing that could lead to less
inequality...credit for "everyone" exists in USA thanks to
strength of free markets, cut that benefit and rich will get
more rich (as everywhere), and poor will stay poor "forever" as
in any latam country....and once the "magic spell" is broken
thing deteriorate pretty fast...i.e. Jimmy Carter

I prefer money stays in hands of private sector than Elizabeth Warren






Help & Support