VZCZCXRO0360
PP RUEHAO RUEHCD RUEHGA RUEHGD RUEHGR RUEHHA RUEHHO RUEHMC RUEHMT
RUEHNG RUEHNL RUEHQU RUEHRD RUEHRG RUEHRS RUEHTM RUEHVC
DE RUEHCV #0801 1772124
ZNR UUUUU ZZH
P 262124Z JUN 09
FM AMEMBASSY CARACAS
TO RUEHC/SECSTATE WASHDC PRIORITY 3274
INFO RUEHWH/WESTERN HEMISPHERIC AFFAIRS DIPL POSTS
RHEBAAA/DEPT OF ENERGY
RHEHNSC/NSC WASHDC
RUMIAAA/HQ USSOUTHCOM MIAMI FL
RUCPDOC/DEPT OF COMMERCE
RUEATRS/DEPT OF TREASURY

UNCLAS CARACAS 000801 
 
SENSITIVE 
SIPDIS 
 
ENERGY FOR CDAY AND ALOCKWOOD 
HQ SOUTHCOM ALSO FOR POLAD 
TREASURY FOR RJARPE 
NSC FOR RKING 
USDOC FOR 4332 MAC/ITA/WH/JLAO 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EPET VE
SUBJECT: PDVSA ANNOUNCES LONG-AWAITED BOND ISSUANCE 
 
REF: A. CARACAS 748 
     ¶B. CARACAS 368 
     ¶C. 2008 CARACAS 930 
     ¶D. CARACAS 564 
 
¶1.  (U) After three months of rumors concerning various plans 
for emitting bonds, PDVSA announced on June 25 terms for a 
USD 3 billion issuance.  The bond, called Petrobono 2011, is 
a dollar-denominated zero coupon bond maturing on July 8, 
¶2011.  It can be purchased in bolivars (Bs) by Venezuelan 
residents and companies through an auction, with bids due 
July 1 and the results (and adjudication methodology) to be 
announced July 2.  The bond is not registered outside of 
Venezuela, and, according to its terms ("convocatoria"), can 
only be traded in the local secondary market in bolivars. 
PDVSA's website states bond proceeds will be used for "local 
obligations"; the convocatoria says they will be used for 
"investments."  The prospectus states that the bond will not 
form part of the position in foreign currency of financial 
entities. 
 
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Comment 
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¶2.  (SBU) Before the June 25 announcement, local analysts 
speculated the rumored emission might have the dual purpose 
of injecting dollars into the parallel foreign exchange 
market and allowing PDVSA to raise funds to pay local debts 
to suppliers.  Because these bonds cannot be traded on the 
international secondary market, they do not represent an 
immediate source of dollars and are unlikely to have a major 
impact on the parallel market.  Whether PDVSA uses the funds 
to pay local debts to suppliers remains to be seen. 
According to PDVSA's audited 2008 financial statements, 
accounts payable to providers closed 2008 at USD 7.5 billion, 
with media sources speculating the figure may currently be 
closer to USD 13 billion.  Were PDVSA to use the bonds' 
proceeds for this purpose, it could pay off a significant 
portion of this debt.  (Note:  The bonds will likely sell for 
more than their face value when comparing the bolivar 
proceeds at the official exchange rate to the face value in 
dollars.  End note.) 
 
¶3.  (SBU) More than anything, this issuance represents 
further government indebtedness on the local market.  The 
central government has been implementing an aggressive plan 
to issue up to Bs 34 billion (USD 15.8 billion at the 
official exchange rate) in local debt in 2009 (ref B).  With 
this issuance, PDVSA is getting into the act, the difference 
being these bonds will be dollar-denominated.  It will be 
quite interesting to see the local market's reaction.  On the 
one hand, there is an ever-growing appetite for dollars, and 
the provision that the bond will not form part of the 
position in foreign currency increases the attractiveness to 
banks (ref C).  On the other hand, given PDVSA's recent track 
record with paying its debts to suppliers (ref D), investors 
may demand a high risk premium for PDVSA debt, especially as 
there are no international protections.  End comment. 
CAULFIELD