Adds chart, details on debt restructuring expectations from paragraph 8

By Marc Jones

LONDON, Jan 5 (Reuters) - Venezuela's default-hit government bonds surged on Monday after the surprise weekend seizure of President Nicolas Maduro by the U.S. fuelled fresh hopes for one of the largest and potentially most complex ever sovereign debt restructurings.

Bonds issued by the government and state oil company, Petroleos de Venezuela, known as PDVSA, jumped as much as 8.5 cents on the dollar US922646BL74=TE, or around 20%, with analysts predicting further gains to come.

"Venezuela and PDVSA bonds have roughly doubled in price during the course of 2025, but should still see a strong bounce — up to 10 points — at the start of Monday’s session," JPMorgan analysts said in a note to clients.

The bonds, which went into default in 2017, were the world's best performing last year, nearly doubling in price as U.S. President Donald Trump ratcheted up military pressure on Maduro.

Monday's moves ramped its 2031 bond USP17625AD98=TE up to almost 40 cents on the dollar, Tradeweb data showed, with others up at between 35 and 38 cents and most PDVSA debt US716558AF83=TE more than 6 cents higher at roughly 30 cents.

Venezuela's government and PDVSA have defaulted on bonds with a face value of around $60 billion outstanding, analysts estimate.

However, the country's total external debt, including other PDVSA obligations, bilateral loans and arbitration awards, stands at around $150 billion to $170 billion, they add, depending on how accrued interest and court judgements are counted.

EXCEPTIONALLY COMPLEX

Investors say any debt rework is likely to be both lengthy and complex, which could keep something of a lid on bond prices.

"Persistent political uncertainty, the high likelihood of a protracted and complicated debt restructuring, and limited visibility on Venezuela’s repayment capacity will likely cap the upside in bond prices," said Alejo Czerwonko, UBS Global Wealth Management's chief investment officer emerging markets Americas.

Citi analysts predict it will require "a multi-track, multi-year settlement framework" given the sheer amount of debt involved, the highly fragmented creditor base and both legal and U.S. sanctions issues.

"We expect Venezuela's debt restructuring to be exceptionally complex, arguably comparable to Greece's (in) 2012," they said in a research note, adding that the outcome will be "highly sensitive" to assumptions around post-transition GDP normalization and the pace of oil-production recovery.

Their "base case" was for Venezuela to impose a 50% principal haircut on its current bonds. It could then offer creditors a 20-year "new bond" and a separate 10-year zero-coupon bond, to make up for all the missed interest payments since 2017.

"We assume debt would need to be reduced at least to around 85% debt-to-GDP at the time of restructuring," compared to almost 175% currently, Citi's analysts said.

"Assuming 14% of oil revenue is dedicated to external debt obligations, the new bonds could afford a coupon at around 4.4%," they added.

(Additional reporting by Rodrigo Campos and Karin Strohecker; Editing by Alison Williams and Alexander Smith)

((marc.jones@thomsonreuters.com; +44 (0)20 7513 4042; Reuters Messaging: marc.jones.thomsonreuters.com@reuters.net X/Twitter @marcjonesrtrs))