Why Venezuela Bonds Are Rallying After Maduro’s Ouster

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0:33Some European allies and Republican lawmakers are pushing back on President Trump's idea of taking over Greenland. Plus, after a long time out in the cold, investors in distressed Venezuelan bonds may finally be a step closer to a payday. One of the big things that's going to have to happen is a forensic experiment where there'll be a look at how much debt is out there, who is it owed to, and then who gets what. But, you know, newsflash, no one's going to get the full amount that they put in. And why removing Maduro may not be enough to attract the U.S. oil industry to Venezuela. It's Tuesday, January 6th.

1:08I'm Alex Osula for The Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world today. After the military raid on Venezuela, President Trump has once again raised the idea of the U.S. taking over Greenland. And that's causing alarm for some U.S. lawmakers and allies. The president said on Sunday that U.S. national security required American control of the territory. And yesterday on CNN, senior White House aide Stephen Miller was asked about whether the U.S. would take military action against Greenland. The United States should have Greenland as part of the United States.

1:48There's no need to even think or talk about this in the context that you're asking of a military operation. Nobody's going to fight the United States militarily over the future of Greenland. Greenland's a Danish territory, and Denmark says U.S. military intervention there would mean the end of NATO. And today, major European allies in NATO called on the U.S. to choose cooperation and not coercion. On Capitol Hill, meanwhile, some Republicans who have supported the Venezuela mission said that talk of taking over Greenland was inappropriate. Others said they weren't sure if Trump was serious, but didn't think an annexation of Greenland would happen.

2:28About a month before the U.S. operation that captured Nicolas Maduro, President Trump hinted to a few American oil executives that something was coming. He told them to get ready. It's an indication of how central oil is to his decision to go into Venezuela, as well as his close ties to the industry. I'm joined now by Colin Eaton, who covers American oil companies for The Journal. Colin, yesterday, White House Press Secretary Caroline Levitt said that Trump was looking forward to working with American oil companies on new investments and opportunities in Venezuela. Why is the Trump administration pushing this?

3:01What is its goal? Well, the oil and gas industry in Venezuela has become central to its economy, and it's been in a dilapidated state over the past two decades. The reason that Trump wants to bring it back, he's talked about lowering oil prices here in the States, but there's also the ancillary effects of the improvement in Venezuela's economy can sort of stem the flow of migrants from Venezuela to the U.S. That's been a priority for the Trump administration. Clearly, Venezuela has a ton of oil. The joint venture assets that Chevron is a part of in Venezuela have a lot of oil underneath them, which is a key reason why Chevron has stayed in the country.

3:50Right. Yesterday, investors seemed excited by the potential for other companies to join Chevron and operate in Venezuela. But these companies haven't announced any plans to do so. You write that people familiar with the matter say Chevron has no plans to increase spending in Venezuela, that ConocoPhillips says it's premature to speculate on new investment and Exxon didn't respond to requests for comment. So equity investors did interpret this as a opportunity for companies to have a new oil frontier. The issue is there are a lot of details that need to be hammered out. The constitution of Venezuela does not allow for any foreign entities to have a majority stake in a project like the ones that Chevron runs.

4:36And oil companies want to see more long-term stability. Companies that have operated in Venezuela have been burned before. And assets nationalized in 2007 under Hugo Chavez. they've been injured and aren't rushing to get back in. My understanding is that for these companies to go back into Venezuela or go into it, removing Maduro was necessary, but not necessarily sufficient. The Trump administration knows it's a high stakes gambit here. And so they're going to do what they can to persuade companies to put American dollars to work in the country. How that goes is going to be in the hands of the oil industry from this point.

5:23That was WSJ reporter Colin Eaton. Thank you, Colin. Thank you. Coming up, another record-setting day for U.S. markets and why investors holding Venezuelan bonds could soon score a payday. That's after the break.

6:04We'll be right back. June 2025. Number one trusted based on August 2025 proprietary survey among real estate professionals.

6:16It's not just oil companies. Another group of people that stands to benefit from Maduro's ouster are bond investors who spent years betting on a Venezuelan comeback. Though many investors sold off their Venezuelan bonds after the first Trump administration sanctioned the country, some longtime investors have held on for years, hoping for a payday. I'm joined now by Matt Wertz, who covers credit for the journal. Matt, walk us through how the prices on Venezuelan bonds have changed in the days since the operation to remove Maduro. Well, in short, they're up. They're up a lot, roughly 25 to 30, 35 percent in some cases.

6:54Venezuela used to be one of the biggest issuers of debt in the emerging markets. All the big banks on Wall Street used to do deals for Venezuela and for Venezuela's state-owned oil company, which goes by the acronym PDVSA. So all these bonds don't trade anywhere near their full face value because they're in default. So they were trading anywhere between like 20, 25, 26 cents on the dollar. And, you know, some of them on the high end and the high 20s. And then after the operation to remove Maduro, they traded up, but then they stopped in like the high 30s, mid 40s. And that's based on the expectation that whatever administration ends up taking power will eventually start negotiating again with bondholders.

7:41What will it take for those negotiations to start? So for that to happen, you need to have a government that's relatively stable. Nobody that I talk to expects that to happen anytime soon. maybe this year, but in the later half of the year. And then once that starts, it can be a very long, messy process, even in a relatively straightforward restructuring, which this is not. It can take several years. Just because the bond prices have moved up, that's based on an expectation that now we might have finally someone who's willing to play ball and try to restructure. There'll be a look at how much debt is out there, who is it owed to, and then who gets what.

8:21But, you know, newsflash, no one's going to get the full amount that they put in. So let's say some of these big bondholders did decide to cash in these bonds now. What kind of payday could they actually see? I mean, some of them have. So some of these funds, they paid close to 100 cents on the dollar, but that was many years ago. So they've written that off. And at this point, anything they make is a gain. So some of them are starting to sell. However, if they were to try to liquidate their position all at once, it would tank the value of the bonds again. So it's not like they can cash out right now, but they can take some of their risk off the table.

8:55And that's what we're seeing. There's been a lot of trading over the last couple of days. That was WSJ reporter Matt Wirtz. Thank you, Matt. All right. Thanks, Alex.

9:07In markets, the Dow and S &P hit new records, with the Dow rising 1 % to close above 49 ,000. The Nasdaq ended up 0.7%. percent. Shares in insurer AIG fell 7.5 percent today on news of its CEO stepping down, while Ford shares gained 2.5 percent after it posted stronger U.S. sales in the fourth quarter. In commodities, the rally continued in copper and silver, which also hit new records.

9:36In Congress, Republican Representative Doug LaMalfa, who represented a district in Northern California for 13 years, has died. His death shrinks Republicans' House majority to 218 seats versus Democrats' 213. And unrest in Iran extended into a second week, with a heavy police response today to a protest in the Tehran Grand Bazaar, the city's central market. Protests began over difficult economic conditions but have taken a political turn, with students and others chanting slogans against the regime.

10:11The group human rights activists in Iran say more than a thousand people have been arrested and at least 29 killed. And President Trump late last week said the U.S. would come to the aid of Iranian protesters if authorities started shooting them. And that's what's news for this Tuesday afternoon. Today's show is produced by Pierre Bien-Aimé with supervising producer Tali Arbel. I'm Alex Osula for The Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.

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