Venezuela Just 24 Hours Away From Formal Declaration Of Default

Less than a week after Venezuela shocked the world by announcing it would proceed to restructure its massive external debt, even as it was within the grace period on hundreds of millions in unpaid interest expense, on Thursday the socialist nation confirmed it has never been closer to an official default after Reuters reported that Venezuela’s state oil-firm company, PDVSA, has not made a debt payments to India’s top oil producer ONGC for six months, and has previously used a Russian state-owned bank and another Indian energy company as intermediaries to make payments.

Reuters sources noted that PDVSA has made no payment since April on what was a $540 million backlog of dividends owed to ONGC for an investment the Indian firm made in an energy project in Venezuela. Venezuela’s President Nicolas Maduro said last week that the country planned to restructure some $60 billion of bonds, much of it held by PDVSA, as the country struggles to meet debt repayments.

While ONGC Videsh -the overseas investment arm of ONGCconfirmed to Reuters that PDVSA had fallen behind on the payments, but declined to give details on the delays.

Curiously, the Indian company appears not to be overly concerned about non-payment for half a year and instead was willing to keep giving Maduro the benefit of the doubt: “They have got certain challenges at this stage,” ONGC Videsh said in an emailed response to Reuters’ questions. “They have assured that they are working on it (payment of dues). In due course it will be settled and follow up steps will be undertaken.” And just to underscore that it has no intention of pushing Venezuela into involuntary bankruptcy, ONGC added that “we have a good working relationship with PDVSA.”

And while we commend India’s camaraderie, Venezuela may be declared insolvent as soon as Friday morning. According to the FT reports that despite promises to the contrary from Caracas, PDVSA did not in fact, make a $1.1 billion payment which was due last Friday, and while some bondholders said they expected the money to arrive soon, others pointed out that the payment deadline had clearly been missed regardless.