Nicolle Yapur, Bloomberg News

CARACAS
EnergiesNet.com 03 02 2023

One of Latin America’s longest-standing distressed-debt investors is upping its bet on some of the world’s riskiest bonds with a plan to recruit bondholders based in Venezuela. 

Copernico Capital Partners SA is teaming with Caracas-based NTN Consultores to attract non-government domestic investors into a dedicated recovery fund. 

Venezuela is under international economic sanctions and the bonds trade as low as 5 cents on the dollar, signaling there is little likelihood that President Nicolas Maduro is about to start renegotiating the $60 billion of defaulted debt. But Copernico sees an opportunity to build its position by wooing private banks, pension funds and individuals in the country, who hold an estimated $1.5 billion of the paper. 

“It’s a small market, but one with a lot of potential in a future restructuring,” said Copernico’s director Juan Blandi. 

The fund, launched in 2020 and split into two pools, invests in defaulted sovereign and state oil company bonds. They returned 31% and 13.4% last year, respectively, according to company documents, though the performance could not be independently verified by Bloomberg. 

The Uruguay-based firm has been focusing on Latin America since it founded what is now one of the region’s oldest hedge funds in 1999. Its Latin America High Yield fund has returned 61% since inception in 2012, outperforming the average return for high-yield bonds in emerging markets by nearly 10 percentage points, according to data compiled by Bloomberg. 

The fund, which has some $17 million in assets, has beat 98% of peers in the three years ended in December, though it declined about 3% last year, according to the latest available data.

Copernico’s latest pitch is to give Venezuela-based investors a chance to pool their holdings through an institution, which potentially gives them more leverage in negotiations and dilutes legal expenses in an eventual restructuring. 

The firm already holds more than $500 million in face value of defaulted Venezuelan debt in its dedicated fund, according to a person with knowledge of their dealings. 

The pile of defaulted bonds returned roughly 19% last year, according to a JPMorgan index. High-yield debt across emerging markets, on average, posted negative returns of 12% in the span, according to a Bloomberg index.

Sanctions prevent US bondholders from engaging with Maduro’s regime, and the dissolution of the opposition’s parallel government has left creditors in the dark. But with the sixth anniversary of the first default coming up in October, the statute of limitations on the bonds is about to kick in. Creditors will have to choose between suing in US courts or losing their rights to pursue the claims.

bloomberg.com 03 02 2023