By Tracy Rucinski
(Reuters) - Creditors reeling from Venezuelan President Nicolas Maduro's recent debt restructuring announcement are balking at his proposal to kick off the talks in Caracas, citing U.S. sanctions and security fears.
Last week Maduro invited creditors to a Nov. 13 meeting in the country's capital to discuss restructuring of some $60 billion in Venezuelan bonds, and put Vice President Tareck El Aissami, accused by the U.S. of dealing drugs, in charge of the effort.
For U.S. creditors, El Aissami's very presence may mean that their attendance would be illegal under government sanctions, the U.S. Treasury said on Wednesday.
But even non-U.S. based investors are demanding to meet in what they say would be a neutral and safer location such as London, Paris, New York or a different Latin American city, according to six restructuring experts and two holders of Venezuelan debt.
"If Venezuela is really serious about having constructive negotiations around their debt stack and debt service issues, and around broader economic issues, they need to meet with creditors in a neutral location," said Bill Derrough, global co-head of restructuring at investment bank Moelis & Co and a veteran of high profile debt restructurings.
Major Venezuelan bondholders include Stone Harbor Investment Partners, BlackRock, Fidelity Management, GMO LLC, Pimco and Ashmore Investment Management, according to Thomson Reuters data.
GMO, Pimco, Fidelity Management and Ashmore declined to comment on whether they will attend the meeting in Caracas, while Stone Harbor Investment Partners and BlackRock did not immediately respond.
Talks to restructure the debt of countries like Greece and Argentina have typically included initial meetings in the country involved, before moving to locations abroad.
But Caracas is one of the world's most violent and crime-ridden cities, where foreigners can be targeted for kidnapping. Most major airlines have stopped flying to the capital or severely cut back flights.
"I don't know of one single investor in New York, or London for that matter, who has accepted the government's invitation to go to Caracas," said one long-time emerging market investor in New York, who holds Venezuelan debt and spoke on the condition of anonymity.
A London-based fund manager who holds Venezuela debt said creditors did not plan on attending any meeting in Caracas, citing worries of violence and investor convenience.
Venezuela has asked investors to confirm they will attend the meeting, according to an email seen by Reuters, but has not provided any details on the venue or time.
Maduro says the country is the victim of an "economic war". The government recognize violent crime is a problem but says that its extent is being exaggerated for political effect.
Debt restructuring experts said that, following initial discussions, talks are normally held in a venue where a critical mass of investors is located, which avoids costly travel abroad.
In the case of Greece, most of the hard negotiations occurred in Paris and London or on the sidelines of meetings held by the International Monetary Fund and World Bank in Washington.
All talks in Argentina's workout were held in New York court or before a mediator after an early meeting in Buenos Aires quickly ended in a shouting match, participants in the Argentine meetings said.
Negotiations for the latest in a series of restructurings by Belize were conducted mainly in New York and Miami.
To engage in a successful debt restructuring, Venezuela would also need to hire lawyers and bankers that investors could trust, Derrough and other advisers and investors said.
Appointing El Aissami, who the U.S. Office of Foreign Assets Control has designated as a drug trafficker, clearly goes in the opposite direction, debt restructuring experts said.
"The invitation to meet with a person under sanction for criminal activity shows a lack of seriousness and essentially is just noise as far as a restructuring is concerned," said Charles Blitzer, a debt restructuring expert and former IMF staffer.
He said the invitation was "more for domestic consumption, so they can say 'look, we want to negotiate but the bondholders showed they are unwilling'".
The Information Ministry did not immediately respond to a request for comment.
El Aissami, who denies the charges of drug trafficking, said last week that the debt negotiation commission would "lay the groundwork for true and transparent dialogue."
(This version of the story corrects title in 5th paragraph)