Oil and Gas

UPDATE 1-Cash-strapped Venezuela seeks deal with bondholders despite sanctions

(Adds reaction from economists, lawmaker)

CARACAS, Sept 15 (Reuters) - Venezuela’s finance minister on Tuesday offered to speak with bondholders about a potential renegotiation of the cash-strapped country’s debt, which economists and financial industry sources said would face challenges due to U.S. sanctions.

The OPEC nation in 2017 suspended payments to holders of many bonds issued by the government, state oil company Petroleos de Venezuela and utility Electricidad de Caracas, and sought to initiate a restructuring process.

But that process got derailed by an escalating political crisis in Venezuela, in the midst of a six-year economic collapse, as well as U.S. sanctions aimed at ousting President Nicolas Maduro that barred U.S. citizens and companies from meeting with Venezuelan officials.

In a state television address, Finance Minister and Executive Vice President Delcy Rodriguez announced a “conditional offer” for bondholders for a deal that would suspend statutes of limitation contained in the bond agreement.

Rodriguez asserted that those statutes were close to expiring, at which point the bondholders would lose certain legal rights as creditors. She did not provide details.

In return, bondholders would have to agree not to sue Venezuela or either of the two companies, or suspend any ongoing litigation.

Rodriguez said the offer aimed to “guarantee that investors are not affected by the illegal actions taken by those who hold power in the United States.”

In addition to the sanctions - which could prevent bondholders from even meeting with Venezuelan officials - many of the bonds were issued under New York state law.

The Trump administration and many U.S. courts have recognized opposition leader Juan Guaido, not Maduro, as Venezuela’s rightful leader.

“There is no legal validity to any restructuring document issued by Nicolas Maduro’s government,” said Francisco Rodriguez, a Venezuelan economist who has advised bondholders.

Washington has sanctioned PDVSA, as well as Venezuela’s central bank and top officials, to try to force Maduro - accused of corruption and human rights violations - to resign.

Guaido, who presides over the opposition-held National Assembly, last year assumed a rival presidency on the basis that Maduro had rigged his 2018 re-election.

Maduro blames Venezuela’s economic woes on U.S. sanctions and accuses Washington of seeking to seize control of the South American country’s oil reserves.

Rodriguez, the finance minister, said bondholders had until midnight on Oct. 13 to express their interest to the government, and encouraged investors to seek permission from U.S. authorities to engage in a potential deal despite the sanctions.

Venezuela has missed more than $10 billion in payments to bondholders. Exports of oil - the country’s main source of foreign currency - are at their lowest levels since the 1940s, leaving the government short of resources potentially to service bonds.

Jose Guerra, an opposition lawmaker who sits on the National Assembly’s finance committee, called the announcement “divorced from reality” and said it was not viable without a plan to restructure Venezuela’s economy and oil industry.

The government did not immediately respond to a request for comment on Guerra’s criticism. (Reporting by Mayela Armas in Caracas Writing by Luc Cohen; Editing by Daniel Flynn and Tom Brown)