Venezuela, state oil firm default on billions worth of bonds

NEW YORK — The Venezuelan government and its state-owned oil company PDVSA have officially defaulted on billions of dollars' worth of bonds, the latest chapter of the country's deep financial collapse.

The International Swaps and Derivatives Association, a group of banks and brokers that determines whether an entity like Venezuela has failed to make on-time payments on its debts, voted Thursday to say that Venezuela had defaulted.

The vote will trigger what is known as a "credit event" on securities like credit default swaps, which investors buy as a type of insurance against a potential default. The 15-member group must now decide how it will settle the swaps.

Two rating agencies — Fitch and Standard & Poor's — already determined this week that Venezuela's government was in default.

PDVSA bonds were trading at 26.5 cents on the dollar, compared with roughly 30 cents back in September, according to FactSet.

Venezuela's debt skyrocketed to over $120 billion under the late President Hugo Chavez as the government spent heavily on social programs while oil prices were high. About half its debt is in the form of dollar-denominated bonds.

A drop in oil prices and mismanagement crushed the economy, leading to widespread shortages of food and other basics amid triple-digit inflation.

At a meeting with investors Monday, Vice President Tareck El Aissami tried to assure creditors that the country's debts will continue to be paid. But those in attendance said they learned of no concrete plans for reorganizing the debt.