Siderurgica del Turbio SA, the Venezuelan steelmaker taken over by the government in 2010, was found to be in default, creating a fresh opportunity for bondholders to demand immediate repayment.
Deutsche Bank Trust Company Americas, the trustee for the $75 million of outstanding bonds issued by the Caracas-based steel producer known as Sidetur, said in a Jan. 30 letter to creditors that a technical default occurred because a reserve account maintained by the company wasn’t fully funded, according to Russell Dallen, the head trader at Caracas Capital Markets, and Ray Zucaro at SW Asset Management LLC. They said they received the trustee’s notice because they own some of the debt.
The technical default offers another chance for debtholders to vote to demand they immediately be repaid in full, an opportunity that first surfaced when the company was taken over because of a change-of-control clause in the bonds, Dallen said today. The securities, which Fitch Ratings cut to seven steps below investment grade in November, last traded at 85 cents on the dollar on Jan. 22 to yield 16 percent, according to prices compiled by Trace, the bond price reporting system of the Financial Industry Regulatory Authority.
Venezuela’s government, which nationalized Sidetur in 2010 and seized its assets in October, said last year it would determine a “fair” price for the company that it would pay.
Duncan King, a spokesman at Deutsche Bank in New York, declined to comment. Calls and e-mails sent to Venezuela’s Industry Ministry, which oversaw the nationalization of Sidetur, weren’t returned. Calls to the phone number listed on Sidetur’s website went unanswered.
Venezuelan President Hugo Chavez has seized companies in the energy, food, metals, cement and banking industries since first taking office in 1999 as part of his plan to create a socialist country. His takeover of FertiNitro in October 2010 handed bond investors windfall profits the next year because of a clause requiring a payout above face value in the event of a nationalization.
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