Venezuela signs debt restructuring deal with Russia, gets China backing

After being downgraded by rating agencies, Venezuela today signed up with creditors in Russia in a bid to restructureits debt crisis plaguing the country.

On Wednesday, Fitch ratings agency had downgraded the cash-strapped nation to 'RD' (Restricted Default), just 24 hours after S&P had downgraded the issue ratings on Venezuela's bond which it had failed to pay to D from CC and cut the country’s long-term foreign currency sovereign credit rating to selective default, or SD, from CC.

Finance minister Simon Zerpa signed a deal with Russia for a $3.15 billion of debt taken out in 2011 to finance the purchase of Russian arms.

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Under the agreement, Caracas will pay back its debts over 10 years, with "minimal" reimbursements for the first six years, Russia's foreign ministry said in a statement.

"The reduction of the burden of debt... will allow the utilisation of funds to develop the country's economy, improve the debtor's solvency and increase the chances of all creditors recovering loans already made," according to the statement on the ministry's website.

"These are very favourable terms that Venezuela can honour. This deal strengthens the relations between our two countries," Venezuelan vice president for the economy Wilmar Castro Soteldo told a press conference.

Communications Minister Jorge Rodriguez said Venezuela was already catching up on the payments.

"Today, we have begun interest payments on Venezuela's foreign debt and last week, PDVSA made its debt interest payments," he said on state television.

"We pay our debts, despite what the ratings agencies, the US Treasury, the European Union or US President Donald Trump says."

While China did not offer any debt relief, the foreign ministryissued a statement saying China's cooperation with Venezuela in all areas was "proceeding normally".

Venezuela has been crippled under heavy US sanctions. The Trump administration had imposed more sanctions even as the country failed to pay creditors with US targeting Maduro government officials by freezing their assets and barring them from doing business with the US.

The US has imposed sanctions against more than 30 Venezuelan leaders, reports said.

The European Union had imposed arms embargo against the oil-rich nation as the state-controlled oil company PDVSA bonds went on a free fall last week.

Venezuela and PDVSA have around $60 billion in outstanding bonds, according to Thomson Reuters data, while private estimates put total foreign debt between $120 billion and $140 billion.