Caracas, Nov 14 (AFP) Venezuela faced the first of whatcould be a cascade of defaults on its USD 150 billion foreigndebt today as Standard and Poor's became the first creditagency to declare the crisis-torn South American country in"selective default".
The US agency's action came after Vice President TareckEl Aissami met with creditors in Caracas Monday but offered noway out of the impasse.
S&P said it had declared Venezuela in "selective default"because it failed to make $200 million in payments on twoglobal bond issues by the end of a 30-day grace period, whichfell on November 12.
"We have lowered two issue ratings to 'D' (default), andwe lowered the long-term foreign currency sovereign creditrating to 'SD' (selective default)," the agency said in astatement late Monday.
It said payments on four other bonds also were overduebut still within the grace period. The overdue bondobligations total USD 420 million, it said.
The debt crunch comes as no surprise in a once prosperousoil producing country whose inhabitants are now strugglingwith dire shortages of food and medicine, as the governmentcuts back imports to service the staggering foreign debt.
It has less than USD 10 billion left in hard currencyreserves, and yet it must make USD 1.4 billion in debtpayments before the end of the year, and another $8 billionnext year.
President Nicolas Maduro has formed a commission torestructure Venezuela's sovereign debt and that of state oilcompany PDVSA.
But at its first meeting with creditors Monday in Caracas-- a 25 minute, close door session -- participants saidofficials proposed no plan for restructuring the debt.
"They said they are going to form working groups toevaluate short- and mid-term debt renegotiation proposals,"Geronimo Mansutti, from the Rendivalores brokerage, told AFP.
"But they didn't give any concrete details on theirplans, on what they hope to get." About 70 per cent of Venezuelan bondholders are NorthAmerican, according to government figures.
S&P said there was "a one-in-two chance that Venezuelacould default again within the next three months." "We would very likely consider any Venezuelanrestructuring to be a distressed debt exchange and equivalentto default given the highly constrained external liquidity,"S&P said.
"In addition, in our opinion, US sanctions on Venezuelaand government members will most likely result in a long anddifficult negotiation with bondholders," it said.
At the meeting with creditors, El Aissami read astatement blaming US sanctions for delays to Venezuela's debtrepayments.
Restrictions include a prohibition on US entities buyingany new Venezuela debt issues -- usually a required step inany restructuring.
El Aissami's presence was problematic for some, as the UShas designated him a drug kingpin with whom US entities arebarred from dealing.
A committee of the International Swaps and DerivativesAssociation (ISDA), meanwhile, is weighing whether holders ofPDVSA debt with default insurance -- credit default swaps --can collect payment.
The Maduro government had said it would make a $1.2billion payment on a PDVSA bond on November 2, but it wasunclear if the funds ever reached creditors.
The so-called Determinations Committee for the Americas,comprised of 15 financial firms, met in New York following aninitial gathering last Friday, "to discuss whether a Failureto Pay Credit Event had occurred" with respect to PDVSA,according to the ISDA.
It ended up deciding to again postpone a decision untilTuesday.
Tightening the squeeze on Maduro was the European Union'sannouncement of sanctions, including an embargo on arms andequipment that could be used for political repression.
Late Sunday, Maduro struck a defiant tone, insisting thathis country would "never" default and pointing to ongoingnegotiations with China and Russia.
But his options are very limited.
A default can be declared in several ways: by the majorratings agencies, big debt-holders or by the governmentitself.
As rough as the ride has been regarding debt, Maduro isalso being buffeted by international accusations that he isacting as an autocrat -- stomping on democracy bymarginalising the opposition, which controls the parliament,and stifling independent media. (AFP)UZM.
This is unedited, unformatted feed from the Press Trust of India wire.