UPDATE 1-Venezuela's bonds rally as US authorises debt restructuring advisors

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Bonds rally as U.S. authorises Venezuela to hire advisors

Venezuela's external debt amounts to $150-$170 billion

Restructuring could be largest ever seen

By Marc Jones

LONDON, May 6 (Reuters) - Venezuela's bonds rallied on Wednesday after the U.S. government gave Caracas the green light to hire advisers for what is expected to be one of the biggest sovereign debt restructuring efforts ever undertaken.

Five months on from Washington's capture of Nicolas Maduro, the U.S. Treasury Department issued a general license on Tuesday authorising "legal, financial advisory, and consulting services in connection with potential debt restructuring".

The South American country and its state oil company Petroleos de Venezuela (PDVSA) owe an estimated $150-$170 billion in debt and unpaid interest.

Venezuela's 2031 sovereign bond USP17625AD98=TE rose almost 2.5 cents to trade above 60 cents on the dollar for the first time since 2014, Tradeweb data showed. Bonds issued by PDVSA were also at near-decade highs. USP7807HAQ85=TE

S&P Global's top sovereign analyst Roberto Sifon-Arevalo said the restructuring, when it happens, would be "big" for a number of reasons.

"There's a lot of money," he said. "And I'm curious to see what new features we are going to see with this restructuring," pointing to other landmark sovereign reworks that have introduced incentives to get them done.

KEY STEP

While the U.S. Treasury's move lays the groundwork for debt talks, further steps will be required before what are likely to be lengthy and complex negotiations can formally begin.

For now there can be "assessment, development, or preparation of debt restructuring options, proposals, and related supporting materials", it said in a statement.

However, the license does not authorise any restructuring or settlement of debt by the government or PDVSA, or direct negotiations between the government and creditors regarding restructuring.

Momentum for a debt restructuring has been gathering since Maduro's removal in January as relations between Washington and acting Venezuelan President Delcy Rodriguez firm.

The International Monetary Fund and the World Bank have also said they are resuming dealings with Caracas, paving the way for a ‌full IMF assessment of Venezuela's economy for the first time in some 20 years.

A core group of bondholders including GMO, Greylock Capital, Fidelity, T. Rowe Price, Mangart Capital and Morgan Stanley Investment Management have said they are ready to begin restructuring negotiations.

A legal representative for the group did not immediately respond to a request for comment.

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