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The Puzzle of PDVSA Bond Prices

14 Pages Posted: 4 Aug 2016 Last revised: 19 Oct 2016

Paolo Colla

Bocconi University - Department of Finance; Bocconi University - BAFFI Center on International Markets, Money, and Regulation

Anna Gelpern

Georgetown University Law Center

G. Mitu Gulati

Duke University School of Law

Date Written: August 1, 2016

Abstract

Market reports in the summer of 2016 suggest that Venezuela is on the brink of default on upwards of $65 billion in debt. That debt comprises of bonds issued directly by the sovereign and those issued by the state-owned oil company PDVSA. Based on the bond contracts and other legal factors, it is not clear which of these two categories of bonds would fare better in the event of a restructuring. However, market observers are convinced — and we agree — that legal and contractual differences would likely impact the payouts on the bonds if Venezuela defaults. Using a comparison of recent weekly yields for roughly similar PDVSA and pure sovereign bonds, we attempt to gain some insights into the value investors assign to the legal differences between these two categories of bonds.

Keywords: Venezuela, pricing, sovereign debt, contracts

JEL Classification: G15, F34, K00, K12, K22

Suggested Citation

Colla, Paolo and Gelpern, Anna and Gulati, G. Mitu, The Puzzle of PDVSA Bond Prices (August 1, 2016). Available at SSRN: https://ssrn.com/abstract=2816856 or http://dx.doi.org/10.2139/ssrn.2816856

Paolo Colla

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136
Italy

Bocconi University - BAFFI Center on International Markets, Money, and Regulation ( email )

Milano, 20136
Italy

Anna Gelpern (Contact Author)

Georgetown University Law Center ( email )

600 New Jersey Avenue, NW
Washington, DC 20001
United States

Gaurang Mitu Gulati

Duke University School of Law ( email )

210 Science Drive
Box 90362
Durham, NC 27708
United States

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