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UPDATE 2-PDVSA wants investors to tender $600 mln extra in bond swap -source

reuters.com

(Adds announcement due Monday in last paragraph)

By Dmitry Zhdannikov and Corina Pons

LONDON/CARACAS, Oct 21 (Reuters) - Venezuelan state oil producer PDVSA wants investors to tender an extra $600 million in a bond swap, preferably from the issue maturing in November 2017, to reach required levels of participation, a source close to the deal said on Friday. "PDVSA is basically signalling they are very close. They need an extra $600 million to be tendered for the swap to go positive," the source said.

PDVSA earlier this week extended a deadline for its $5.3 billion debt swap offer to Friday and warned that if the operation failed the cash-strapped company might struggle to pay its debt. The swap offer was designed to ease operations as the company struggles under low oil prices, slumping production and a cash flow deficit that has left it unable to pay contractors on time.

But low participation led PDVSA to sweeten the exchange's terms, extend deadlines and, on Monday night, warn it "could be difficult" to pay bondholders if the operation flops.

The swap allows investors to exchange bonds maturing in 2017 for a new bond maturing in 2020.

The $600 million amount said to be needed would appear to suggest the company has reached about a 41.5 percent participation rate, as the company has set a participation target of 50 percent of all outstanding bonds worth some $7.1 billion.

PDVSA did not immediately respond to a request for comment.

Holders of the November 2017 bond have been more reluctant to enter the swap because of less favorable terms, traders say.

The new 2020 bond carries an 8.5 percent coupon, just like the November 2017 bond. In contrast, the bond maturing in April 2017 has a coupon of 5.25 percent.

There were also some market worries over the electoral authority's suspension of the next phase of a recall referendum against unpopular President Nicolas Maduro, which sparked an outcry from the opposition who accused the Socialist government of dictatorial tactics. "The delay of a political transition would represent the worst-case scenario for bondholders as this shifts the range lower for recovery value," said Siobhan Morden with Nomura Securities International.

The swap deadline is Friday at 5 p.m. local (2100 GMT).

PDVSA will make an announcement on the swap operation on Monday, a source close to the operation told Reuters on Friday night.


(Reporting by Dmitry Zhdannikov in London and Alexandra Ulmer and Corina Pons in Caracas; Editing by Leslie Adler)

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