Venezuela plans $300 mln local debt swap-sources

www.forbes.com Reuters, 01.23.03, 6:14 PM ET

CARACAS, Venezuela, Jan 23 (Reuters) - The Venezuelan government plans to offer a $300 million domestic debt swap as it struggles with a fiscal crisis deepened by a seven-week-old opposition strike, banking sources said on Thursday.

The swap to extend maturities of bonds would offer an exchange of National Public Debt (DPN) bonds due between the end of this week and next Monday for new issues coming due at least eight months later, the sources said.

Finance Ministry representatives met Thursday with bankers to explain the difficulties the government faced covering the upcoming payments on National Public Debt notes and also to offer them the bond swap, one banking source told Reuters.

"The banks can go into the swap voluntarily and the consensus seems to be to accept it. No one wants a default," said a source who asked not to be identified.

Finance Minister Tobias Nobrega on Wednesday announced that the government would carry out domestic debt exchanges as part of a plan to counter the impact of the strike in the world's fifth largest oil exporter.

The stoppage, staged by opposition leaders and dissident oil workers demanding President Hugo Chavez resign, has drained government coffers by slashing oil production and exports which provide nearly half of state revenues.

About half of the 540 billion bolivars in notes available for the swap are with public institutions, the sources said, with about 130 billion bolivars worth held by private banks, and the remainder spread between public and private trust funds. The Central Bank will conduct the exchange, they added.

The swap would be similar to the auction conducted at the end of last year when the government extended for one to five years maturities on $2 billion in domestic debt -- about 37 percent of the total domestic public debt due between December 2002 and June 2005.

With more than 75 percent of the country's domestic debt maturing during that period, the government hoped the swap would smooth out a crunch in payments over the next two years.

The government has also slashed its 2003 budget and suspended foreign exchange trading to halt capital flight and stop the sharp slide in the local bolivar currency. The bolivar has been battered by strong demand for U.S. dollars as investors look for safe haven from Venezuela's economic crisis. (Reporting by Silene Ramirez, additional reporting by Ana Isabel Martinez, editing by Gary Crosse; Reuters Messaging: silene.ramirez.reuters.com@reuters.net, 58-212-277-2656, pat.markey@reuters.com)