UPDATE 2-Venezuela state power company defaults on $650 mln bond: trustee

(Adds ISDA to reconvene, CDS movements)

CARACAS, Nov 10 (Reuters) - A Venezuelan state-run power company has defaulted on a $650 million bond that comes due in 2018 by failing to make an interest payment, the bond's trustee said on Friday, a confirmation of the OPEC nation's dire cash-flow crunch.

The 'Elecar' bond, originally issued by Electricidad de Caracas but known as Corpoelec since its 2007 nationalization, had been due to pay a $28 million coupon on Oct. 10.

That was delayed under a 30-day grace period which ended on Nov. 9, bondholders told Reuters.

"The Issuer's failure to pay interest on the Notes when due on October 10, 2017 constitutes a Default under the Indenture," said Wilmington Trust, a provider of international and corporate institutional services, in a notice posted on the Luxembourg stock exchange.

Venezuela's Electricity Ministry, which oversees Corpoelec, did not immediately respond to a request for comment.

Wilmington Trust did not answer calls seeking comment.

The default comes on the heels of President Nicolas Maduro's announcement that his cash-strapped government will refinance and restructure all future foreign debt payments, leaving investors on edge as to the fate of some $60 billion in bonds issued by Venezuela and state oil company PDVSA.

Plans to restructure those bonds are due to be discussed at a meeting with creditors called by Maduro for Monday in Caracas, although several investors have said they will not attend.

Some investors could interpret the failure to make the payment on the Elecar bond as a sign that Maduro could be preparing a wider default.

However, the relatively small Elecar default will not automatically trigger default on those other bonds.

Unlike the Elecar issue, PDVSA and Venezuela bonds carry "cross default" clauses which mean that a default on one bond puts a number of other bonds in default as well.

Two Elecar bondholders said any credit lawsuits resulting from the default would have to be filed against Corpoelec, rather than against the government of Venezuela.

Separately, Venezuela will sign a debt restructuring deal with Russia next week, a source told Reuters on Friday.


Venezuela and PDVSA bond prices were rising on Friday on a report the state oil company transferred funds to make a delayed principal payment on its 2017N bond that matured last week.

Venezuela's 2022 bond was up 4.950 points to bid 26.950 points, while PDVSA's 2020 bond was up 5.500 points to bid 78.500.

Settling agent DTC told PDVSA creditors on Thursday that it received the funds to begin processing the principal payment on the PDVSA 2017N bond, three market sources told Reuters.

Bondholders contacted by Reuters said they still had not received the funds as of Friday. The full payment of $1.169 billion, which includes $1.121 billion in principal and $47 million in interest, was due on Nov. 2.

A committee of derivatives industry group ISDA will reconvene on Monday to discuss whether PDVSA has triggered a credit event through the late payment of the 2017N bond, ISDA said on its website on Friday.

An affirmative decision would trigger payment on credit default swaps, a form of insurance against default, on PDVSA bonds.

PDVSA CDS prices exploded higher in the last week amid mounting anxiety over possible default.

Prices jumped most for the shortest-dated CDS contracts - with the 6-month contract price leaping more than 10-fold at one point - reflecting the view that a PDVSA default is imminent.

The default probability associated with PDVSA's 6-month contract was 99.86 percent as of Thursday evening, according to data provider Markit, up from around 57 percent in early November. (Reporting by Brian Ellsworth, Corina Pons and Eyanir Chinea in Caracas, Davide Scigliuzzo and Dan Burns in New York; Editing by Andrew Cawthorne and Rosalba O'Brien)