Venezuela creditor group adds 15 funds ahead of record debt restructuring

A group of investors holding defaulted Venezuelan bonds is growing its ranks as the country edges toward what could become the largest sovereign debt restructuring on record, with total claims approaching $240 billion.

New Members Join as Talks Gain Momentum

More than 15 investment funds have joined the Venezuela Creditor Committee since early January, according to Bloomberg Morgan Stanley ↘ 1.32%, as warming relations between Caracas and Washington fuel expectations that restructuring negotiations could soon begin in earnest. The committee, whose members include Morgan Stanley Investment Management, Grantham Mayo Van Otterloo, Fidelity ↗ 3.75%, Greylock Capital, and VR Capital, is in talks with additional US and UK hedge funds as it seeks to represent roughly half of Venezuela's approximately $60 billion in outstanding international bonds.bondblox+2

The committee signaled its readiness to negotiate as early as January, when it issued a statement saying it "stands ready to initiate a negotiated debt restructuring process". In February, the group selected Houlihan Lokey ↗ 3.55% as its financial adviser, preparing creditors to negotiate over roughly $60 billion in bonds — or about $100 billion including overdue interest — that have been in default since 2017.octus+1

A Restructuring of Historic Scale

Venezuela formally announced on May 13 that it would begin restructuring its sovereign debt and that of state oil company PDVSA, hiring Centerview Partners as its adviser. The total debt perimeter, according to a Financial Times report in June, stands at approximately $240 billion — materially above earlier market estimates and eclipsing Greece's 2012 restructuring in scale.piie+2

The U.S. Treasury's issuance of General License 58 on May 5 removed a key barrier by allowing Venezuela to hire restructuring advisers. However, no execution license has yet been issued by the Office of Foreign Assets Control, meaning no transaction can close until further authorization is granted.venezuelarestructuring+1

Roadmap Expected as Country Recovers from Earthquakes

Calixto Ortega, Venezuela's vice president for economy and finance, stated in mid-July that the country would continue the restructuring process despite the devastating earthquakes of June 24. The interim government led by Delcy Rodríguez is expected to present its debt sustainability analysis imminently, after the original end-of-June target was pushed back.orinocotribune+1

Reuters reported that Venezuela is seeking to push through the restructuring "in record time," even as it grapples with post-earthquake recovery. Oxford Economics has estimated Venezuela's debt burden at extreme levels relative to GDP, with the country's economy still roughly 70 percent below its 2013 peak.usnews+2