CARACAS Feb 1 Deutsche Bank, the trustee for a
$100 million bond issued by Venezuelan steelmaker Sidetur, has
issued a notice of default saying the company violated one of
the provisions of the bond sale.
Deutsche Bank said in a Jan. 30 statement that Sidetur,
nationalized by Venezuelan President Hugo Chavez in 2010, had
failed to make necessary deposits to a debt servicing reserve
fund required by the covenants of the financing deal.
The company, which makes rebar, flat and angle steel
products, did not respond to phone calls seeking comment.
Deutsche Bank declined to comment on the matter, but did
confirm that a notice of default was issued.
The situation highlights growing concerns about the
leadership of Venezuela's government as Chavez remains in Cuba
for medical treatment nearly two months after a complex cancer
operation in early December.
His allies insist he is fulfilling his duties as normal even
though he has not been seen nor heard from since the operation.
But business leaders say the government has avoided making
key decisions in Chavez's absence including a currency
devaluation they say is necessary to resolve nagging product
Defaulting on bonds frequently implies that an issuer failed
to make a coupon payment. But even without missing payments,
countries or companies can be in "technical default" by failing
to comply with the often complex terms agreed upon at issue.
The bond, which carries a coupon of 10 percent, has a
bid/ask spread of 75-80 cents on the dollar, with a yield of
20.89 percent, according to pricing from Deutsche Bank's
Autobahn trading platform via Thomson Reuters Eikon.
Deutsche Bank said in the default statement it did not plan
to take any further action. It was not immediately evident if
bondholders would push for measures to be taken.
The socialist Chavez has nationalized numerous companies
over the last six years ranging from crude oil projects to
cement, steel and food producers.
Though many of those companies have filed arbitration suits
alleging Venezuela did not adequately compensate them, the
Chavez government has avoided disputes with bondholders affected
by the state takeovers.