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Financials

UPDATE 2-Venezuelan central bank eyes $1 bln 'repo' deal with Nomura -source

(Adds information from government source, context on bonds)

CARACAS, Feb 8 (Reuters) - Venezuela’s central bank is considering a repurchase agreement that would provide $1 billion from investment bank Nomura in exchange for bonds issued by state oil company PDVSA, according to a document and source familiar with the situation.

The proposal is part of the crisis-hit OPEC nation’s efforts to shore up its waning currency reserves as its socialist economy struggles with triple-digit inflation, chronic product shortages and a severe recession.

Under the proposed transaction known as a “repo,” Nomura would receive PDVSA bonds with a face value of $3 billion that mature in 2022, according to a document about the operation that was sent to the central bank and seen by Reuters.

Nomura would provide more than $1 billion, which the central bank would have to pay back in three years, according to the source, who has knowledge of the proposal.

The transaction would allow the central bank to monetize the bonds without selling them on the open market, which would risk driving down prices of other PDVSA bonds that already sell at a significant discount, the source said.

Nomura declined to comment. The central bank did not respond to a request for comment.

The operation would need the approval of the central bank’s new president, Ricardo Sanguino, the source said, because the original mandate was given under the leadership of former president Nelson Merentes.

A high-ranking government source this week told Reuters the central bank was broadly seeking to use state assets including PDVSA bonds as collateral to obtain liquidity.

He did not specifically mention Nomura.

The bonds to be used in the operation have never traded on the open market because they were sold to the central bank in a private transaction in 2014. A separate PDVSA bond maturing in 2022 that was issued in 2011 sells for 65.000 with a yield of 28.001 percent.

Venezuela’s reserves stand at $10.5 billion dollars, the lowest in 21 years. The central bank has since 2014 carried out various gold swap transactions as part of efforts to improve liquidity of its reserves, which are primarily held in gold. (Writing and additional reporting by Brian Ellsworth,; Editing by Paul Simao and Meredith Mazzilli)

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