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Venezuela to Pay 15.25% Yield on $3 Billion of BondsBy Daniel Cancel - Aug 10, 2010

Venezuela may pay a yield of 15.25 percent on $3 billion of bonds, the countrys first local market salesince October, Barclays Plc said.

The 12.75 percent notes, which mature in 2022 and will be sold at a price of 100 percent of face value , will offer an implicit exchange rate of 4.95 bolivars per dollar, Barclays analysts Alejandro Grisanti andJuan Cruz wrote in a report today from New York.

Venezuela, which sets two exchange rates for imports and a third rate that is determined by the central bank, is seeking to meet demand for dollars among companies and individuals after President HugoChavez closed the unregulated currency market in May. Yields on Venezuelas benchmark 9.25 percent

bonds due in 2027 jumped 12 basis points, or 0.12 percentage point, to 13.4 percent today on concernthe new issue will create a supply glut, according to data compiled by Bloomberg.

Generally Venezuelan bonds tend to yield higher than other securities on the curve when they hit themarket, Grisanti said in a phone interview. The coupon and yield were set high so that the exchangerate stays below the rate at the central bank.

Venezuela will issue about $1 billion of the bonds to banks to supply the central banks currency market, known as Sitme, according to Barclays. The central bank administers the buying and selling of dollar-denominated bonds at Sitme at an average exchange rate of 5.3 per dollar. The bank limitscompanies to $50,000 a day and $350,000 a month for imports.

Easy to Sell

Sitme has traded $1.14 billion since opening on June 9.

Venezuela may increase the size of the offering to $4.5 billion because of demand from local investors,according to Asdrubal Oliveros , a director at Caracas-based consulting and economic research firmEcoanalitica.

It will be very easy to sell these bonds because of the conditions for locals, Oliveros said. Thegovernment will attract demand of at least double the original amount.

Finance Minister Jorge Giordani told reporters today in Caracas that any decision to boost the size of the offering would be made by the government at a later date.

zuela to Pay 15.25% Yield on $3 Billion of Bonds - Bloomberg http://www.bloomberg.com/news/print/2010-08-10/pdvsa-to-sell-3-billi..

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Fitch Ratings assigned a long-term foreign currency rating of B+ to the bond today, in line with Venezuelas issue default rating with a stable rating outlook.

Venezuelas comparatively low government debt burden, its governments demonstrated willingness toservice debt even during financial stress, and its manageable debt maturity profile support thesovereigns ratings at the current level, Fitch said today in a statement.

State oil company Petroleos de Venezuela SA may sell $3 billion of bonds in the fourth quarter,Grisanti said, citing talks with the company and central bank officials during a recent trip to Caracas.

A spokesman at PDVSA, as the company is known, declined to comment on the report. A central bank spokesman wasnt available to comment.

To contact the reporter on this story: Daniel Cancel in Caracas at dcancel@bloomberg.net .

2010 BLOOMBERG L.P. ALL RIGHTS RESERVED.

zuela to Pay 15.25% Yield on $3 Billion of Bonds - Bloomberg http://www.bloomberg.com/news/print/2010-08-10/pdvsa-to-sell-3-billi..

8/12/2010