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Goldman Buys $2.8B Worth of Venezuelan Bonds, and an Uproar Begins

nytimes.com

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Re: Goldman Buys $2.8B Worth of Venezuelan Bonds, and an Uproar Begins

#91

Post by _r_o_y_ »

jevgeni wrote: post #79
1zq wrote: post #77

Earlier quoted context omitted.

But you can be the Venezuelan central bank and buy $2.8 billion in PDVSA-issued bonds and later sell those bonds at a 70 percent discount (i.e. around 840$ million) to Goldman Sachs. Until the moment of the sale to GS the money had only been transferred between two entities associated with the government.

Yeah, but how does that generate free money for the Venezuelan state?

The first one would be just like a transfer between accounts while what op suggest is that now they're receiving the money from Goldman.

Re: Goldman Buys $2.8B Worth of Venezuelan Bonds, and an Uproar Begins

#92

Post by jevgeni »

conanbatt wrote: post #59
jevgeni wrote: post #54

Earlier quoted context omitted.

It is a difficult situation, but then again, revolutions are tough. I'm not sure about this debt package, but I'm betting this was issued by the Venezuelan government to fund some real assets, like oil rigs or whatever. If that's the case, then the capital is still there, one just must make sure it generates profits. A worse situation would be if the gov't loaned out the money, put it in suitcases and ef'ed off.

The latter is what happens on an unstable government that thinks its going down. Poeple scramble to get the last piece and get out. IT might not happen with this, but it might and being south american, its likely.

This might happen, if the government can issue the debt immediately. That's highly unlikely in an unstable situation like in Venezuela.

I couldn't find anything in the article, but I bet the debt was issued way before the unrest began. If there was any embezlement, it had to be way earlier.

Re: Goldman Buys $2.8B Worth of Venezuelan Bonds, and an Uproar Begins

#93

Post by jevgeni »

_r_o_y_ wrote: post #91
jevgeni wrote: post #79

Earlier quoted context omitted.

Yeah, but how does that generate free money for the Venezuelan state?

The first one would be just like a transfer between accounts while what op suggest is that now they're receiving the money from Goldman.

Yeah, but they are not. If I sell you a car for $5000, I get the $5000 and you get the car. When you then resell the car to someone else, I am not involved in the deal in any way.

Re: Goldman Buys $2.8B Worth of Venezuelan Bonds, and an Uproar Begins

#95

Post by dkrich »

shaqbert wrote: post #18
devoply wrote: post #10

Goldman is not betting Venezuela will sort itself out. Goldman is betting it can extort the future government of Venezuela out of money it does not have if it wants funding from IMF or the World Bank. The justification they are giving is that they bought it off a secondary market...

With the government owned oil co being the issuer, this looks like a pretty smart bet by Goldman. If oilco does not default, great, you get a ridiculous discount and a high coupon. If oilco does default, great, you have ample of collateral in tankers and other tangible assets you might be able to recover, so the recovery rate will be higher than the 30 cents that Goldman paid on the dollar. Also, whatever happens wit…

> If oilco does default, great, you have ample of collateral in tankers and other tangible assets you might be able to recover, so the recovery rate will be higher than the 30 cents that Goldman paid on the dollar. Also, whatever happens with the venezuelan government, the new government will also want to have a functional oilco.

I don't think that's the case simply because if it were that safe a bet the bonds wouldn't be trading at such a huge discount. It's the inherent risk that the government won't pay the bonds that enable them to trade at a discount. The bet is that the government won't default because if they did they would have a very hard time convincing people to buy bonds again in the future.

Re: Goldman Buys $2.8B Worth of Venezuelan Bonds, and an Uproar Begins

#96

Post by jevgeni »

1zq wrote: post #90
jevgeni wrote: post #79

Earlier quoted context omitted.

Yeah, but how does that generate free money for the Venezuelan state?

It doesn't generate free money. On the contrary, it generates very expensive money. For this operation, the central bank received about $840 million in cash from GS, and PDVSA must now pay back $2.8 billion plus interest to GS. Whereas before this operation, PDVSA (owned by the Venezuelan state) had to pay back $2.8 billion plus interest to the central bank (also owned by the Venezuelan state).

But where did the central bank get the 2.8 billion USD? Venezuelan central bank can't print USD. So, net the country owes 2.8 billion USD + interest either way. It's just that the ultimate creditors have changed.

Re: Goldman Buys $2.8B Worth of Venezuelan Bonds, and an Uproar Begins

#97

Post by jevgeni »

tyingq wrote: post #56
jevgeni wrote: post #51

Earlier quoted context omitted.

It isn't much of a deterrent, if you know that only a single competitotor of yours or just a few companies will be singled out for the outrage. Time and time again. There are fund managers, pharma companiess, and industrial conglomerates that acted way more shitty than most banks, but people tend to ignore that or forget that very quickly.

Well, it did give the opposition a podium that they didn't otherwise have. I would guess many of us wouldn't have thought about Venezuela today otherwise.

I like this idea. Although the economic arguments aren't particularly strong, they give the opposition an opportunity to be noticed.

Re: Goldman Buys $2.8B Worth of Venezuelan Bonds, and an Uproar Begins

#98

Post by rmah »

Bartweiss wrote: post #72
cm2187 wrote: post #61

Earlier quoted context omitted.

If they go long these bonds they are nasty speculators who are betting on the fact that Venezuelans will bleed themselves to repay. If they go short the bonds they are nasty speculators who are trying to make money on a country going bust. At this game it doesn't matter what they do, they will get this sort of reaction.

It's true that any involvement with Venezuela will make someone angry, but I don't think it's the same someone. Would shorting them really have angered the opposition? It seems like a move that would mostly have outraged the Venezuelan government, and having them angry at you is hardly a moral failing.

Yes, because heavy action on the sell side means Venezuelan debt prices would go down, which would raise the yield. Which means that future bonds issued by their gov would have to pay a higher coupon. This would definitely anger them.

Re: Goldman Buys $2.8B Worth of Venezuelan Bonds, and an Uproar Begins

#100

Post by euyyn »

mhuffman wrote: post #70
imiller wrote: post #67

Earlier quoted context omitted.

Interest is because of the time value of money and risk, not just risk.

Time value of money is also based on risk. You are betting that there is an alternative sure thing at which you could earn some expected rate.

Mostly on need, though. If I'm hungry, I'm hungry now, not 10 days from now.
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