Venezuela's Bond Surge and the Complex Road to Debt Restructuring

Venezuela's government bonds soared after President Nicolas Maduro's arrest by the U.S., signaling optimism for debt restructuring. Bonds from the state oil company, PDVSA, also increased. The country's total external debt stands near $170 billion, and restructuring is expected to be lengthy and complex due to various geopolitical challenges.

Venezuelan government bonds experienced a substantial rise on Monday, subsequent to the unexpected apprehension of President Nicolas Maduro by the United States, which rekindled hopes for what could become a historic sovereign debt restructuring. Bonds tied to both the government and the state oil company, Petroleos de Venezuela (PDVSA), surged by up to 8.5 cents on the dollar, amounting to an increase of approximately 20%, according to analysts who foresee continued gains.

JPMorgan analysts highlighted that the values of Venezuelan and PDVSA bonds have almost doubled throughout 2025. However, they predict these bonds could surge further—up to 10 points—as trading commenced on Monday. Previously defaulted in 2017, these bonds were among the top performers last year, owing to heightened U.S. military pressure on Maduro. Tradeweb data illustrated the 2031 bond's escalation to about 40 cents on the dollar, with other bonds rising to between 35 and 38 cents, and most of PDVSA's debt exceeded 6 cents at roughly 30 cents.

Despite these developments, Venezuela's foreign debt, encompassing PDVSA's additional liabilities, bilateral loans, and arbitration awards, is estimated to range from $150 billion to $170 billion. Complex restructuring is anticipated due to political uncertainty, legal, U.S. sanctions, and a fragmented creditor base. Citibank predicts a multi-track, multi-year framework, comparing the situation to Greece's 2012 debt crisis, suggesting a 50% principal haircut and new bond offerings to ease previous defaults.

(With inputs from agencies.)