NEW YORK, Feb 2 (IFR) - Venezuela may need to restructure its oil-linked Chinese debt before undertaking any similar move with its international bondholders, Barclays said in a report on Tuesday.
The OPEC nation is widely believed to be headed for a credit event thanks to the dramatic tumble in oil prices, which has wreaked havoc on the Latin American country’s economy.
Barclays said Venezuela is falling short of the daily oil shipments to China that it uses to repay loans from Beijing, as the fall in prices has raised the number of barrels needed.
At current prices the country needs nearly 800,000 barrels a day to satisfy its loan payment, Barclays said - sharply up from the roughly 228,000 needed when oil was at $100 per barrel.
“A restructuring of Chinese fund debt could be supportive for Venezuela,” Barclays analysts wrote.
“Venezuela would need to send about 774,000 barrels a day to China, something that does not seem to be happening and is not easy to achieve in the short term.”
While the loan terms have not been made public, the bank estimates that Venezuela owes China about US$7bn this year, and believes that a restructuring is more likely than a new loan.
“That could allow Venezuela to buy some time, or lower the level of oil prices needed to avoid a credit event in 2016,” Barclays said.
Oil accounts for more than 90% of Venezuela’s exports, and the collapse in crude prices has emboldened the opposition to the government of President Nicolas Maduro.
“With the political and economic uncertainty in the country, we doubt that the Chinese authorities could have an incentive to increase (their) exposure to Venezuela significantly,” Barclays said.
“They might prefer to wait and negotiate with an eventual new administration,” the bank said.
“Therefore in the absence of a regime change that might open new financing alternatives, Venezuela remains basically dependent on a rebound of oil prices and its capacity to further cut imports to avoid a credit event.” (Reporting by Paul Kilby; Editing by Marc Carnegie)