“We would very likely consider any Venezuelan restructuring to be a distressed debt exchange and equivalent to default given the highly constrained external liquidity,” S&P said in the statement. “In addition, in our opinion, U.S. sanctions on Venezuela and government members will mostly likely result in a long and difficult negotiation with bondholders.”

The nation, home to the world's largest oil reserves, owed investors about $200 million and failed to make those payments by the end of a 30-day grace period, S&P said in the statement in which it lowered the country's rating to SD. Plagued with payment delays and running low on cash—and with most of its debt trading near 30 cents on the dollar—it's the first time in recent years the government has exceeded the buffer period on its bonds.

With bonds already deeply distressed and the prospects for credit-default swaps to trigger on the late payments, the market reaction early Tuesday was relatively muted. Venezuela's government debt has lost 20% in November alone, compared with an average 0.9% decline for developing nations, according to the Bloomberg USD Emerging Market Sovereign Bond Index.

Investors in Venezuela's $5 billion of bonds maturing in 2019 and 2024 can organize to demand that the nation immediately pay back all they're owed, and down the line, holders of the nation's other debt, which have cross-default provisions, could choose to do the same.

It's possible investors won't take those actions, and instead put their hopes on getting a delayed payment. Otherwise, they risk setting off what could be the start of one of the messiest debt restructurings ever. S&P said there was a 50% chance Venezuela will default again within the next three months.

On Tuesday, the International Swaps & Derivatives Association will reconvene to consider whether PDVSA's delayed debt payments will trigger default-insurance contracts. ISDA, as the group is known, may also receive new requests to rule on whether the government is also now non-

The event in Caracas, held across from the presidential palace at the Palacio Blanco, was promoted as a critical conclave for foreign investors. Most of the attendees were locals, and none were allowed to ask questions. Finance Minister Simon Zerpa, Oil Minister Eulogio del Pino, PDVSA President Nelson Martinez and planning vice president Ricardo Menendez were also in attendance.

In a statement, the Information Ministry called the meeting a “resounding success,” and “extremely positive.” Creditors from the Venezuela, the U.S., UK, Argentina, Colombia, Chile, Japan, Germany and Portugal were in attendance, the ministry said.

It was never clear what the country could accomplish in terms of a restructuring. U.S. sanctions currently prohibit the type of bond swaps that would usually be part of any debt relief, and investors have shown a reluctance to engage with a government that's become an international pariah amid allegations of anti-democratic activities. The Treasury had advised U.S. investors to exercise extreme caution to avoid running afoul of sanctions.

El Aissami blamed an international financial blockage for making it difficult to get the money to investors, citing a move by Citigroup to close some of the country's accounts, Euroclear freezing PDVSA bond payments and Deutsche Bank's decision to discontinue its role as a correspondent bank this month. A Deutsche Bank official declined to comment. Spokesmen at Euroclear and Citigroup didn't respond to requests for comment.

In a speech before the UN Security Council on Monday, U.S. envoy Nikki Haley said Venezuela is “increasingly a violent narco-state that threatens the region, the hemisphere and the world.” Representatives from the South American country boycotted the meeting in Manhattan, as did Russia and China, two countries that have served as lenders of last resort.

From: Bloomberg News

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