S&P cuts Venezuela's sovereign debt rating to 'selective default'

Venezuela just defaulted moving deeper into crisis

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Standard & Poor's declared Venezuela in "selective default" on Monday, after it failed to make $200 million in payments on its global bonds, becoming the first credit ratings agency to do so. S&P lowered two issues' ratings to "D" (default) and said there is a one in two chance that the government.

The Venezuelan government said Monday that the country has successfully begun the process of refinancing its foreign debt during a meeting earlier in the day in Caracas with bondholders from various countries.

A drop in oil prices has contributed to a galloping shortage of basic goods in the country with the world's largest proven oil reserves, where inflation is expected to reach 1,000 per cent this year.

President Nicolas Maduro has formed a commission to restructure Venezuela's sovereign debt and that of state oil company PDVSA.

Venezuela is buried under a $150 billion foreign debt mountain, including $28 billion owed to its biggest creditor China and another $8 billion to Russian Federation.

"They said they are going to form working groups to evaluate short- and mid-term debt renegotiation proposals", Geronimo Mansutti, from the Rendivalores brokerage, told AFP.

Yesterday, as nervous, mainly US, creditors met in Caracas to find out what might happen to the US$ Venezuelan sovereign bonds they own, S&P downgraded these to "soon-to-default" status.

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Restrictions include a ban on U.S. entities buying any new Venezuela debt issues - usually a required step in any restructuring. And many creditors also can't negotiate with El Aissami: He, too, is sanctioned by the US Treasury, which accuses him of drug trafficking.

A committee of the International Swaps and Derivatives Association (ISDA) is weighing whether holders of PDVSA debt with default insurance - credit default swaps - can collect payment.

Adding to the pressure on Maduro was the European Union's announcement of sanctions.

But his options are very limited.

Under the sanctions, no United States citizen can do business with Venezuelan individuals on the list.

Permanent council members Russian Federation and China boycotted the meeting, as did non-permanent members Bolivia and Egypt.

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