Investors taking the long view still believe that the government will find a way to keep paying what it owes.
Their calculation, Mr. Buchheit said, is simple: whether the price of the bonds is below what might be recovered through a debt-restructuring agreement or as part of legal enforcement if Venezuela refuses to negotiate.
With the country’s political and social disarray, United States sanctions, and recent demands from the government of President Nicolás Maduro that bond investors agree to a debt deal, Venezuelan bonds have plunged in price from over 30 cents to the low 20s.
According to the data-gathering firm FactSet, established firms like Goldman Sachs, Fidelity and T. Rowe Price still sit on about $3.5 billion worth of bonds issued by the national oil company Petróleos de Venezuela, or Pdvsa.
By far, these have been the favorite bonds for foreign investors because the company is seen as the country’s cash cow, with its steady stream of foreign-exchange earnings and its wealth of overseas assets.
But as the Venezuelan economy continues to deteriorate, the risks of owning these bonds have grown significantly. The country’s foreign-exchange reserves have fallen below $10 billion — a level economists say comes close to insolvency — and experts say striking a debt deal will not be easy, especially with an unpopular government and dueling legislatures.
And so the selling has begun.
“We have significantly reduced our portfolio in Venezuela over the past year,” said Jan Dehn, the head of research at Ashmore Investment Management, an emerging-market specialist based in London. “This is a slow-moving train wreck.”
For these experts in distress, or vulture investors, it is at this point that they get serious about committing funds. And those who have been through many such situations say Venezuela could become the most profitable of all.
That is because many debt disasters occur in small countries in Africa and Latin America with limits on the bonds one can accumulate. And in larger countries like Argentina and Greece, profits were hard to come by as nations drove hard bargains.
Venezuela is a special case for several reasons, debt experts say.
Because of sanctions, it has been unable to hire a team of top bankers and lawyers who might help reach a favorable agreement with creditors. The haphazard nature of the government’s tactics was revealed this week when a ballyhooed session with bond investors in the capital, Caracas, produced few attendees and no results.
Unusually, the government has asked bondholders to come up with a plan for restructuring the debt. In most cases when a sovereign nation runs out of cash, a debt proposal is imposed on investors.
Also, Venezuela’s oil company has lucrative assets in the United States and Europe that holdout investors could try to seize through a lawsuit in a foreign court if the country stopped paying.
Debt financiers also point out that for all its troubles, Venezuela is rich in resources, with the largest proven oil reserves in the world. Many billions of dollars have fled the country but could come back quickly if there was a change in government.
While other investors have been selling, Hans Humes, the founder and chief executive of Greylock Capital, a fund that specializes in distressed debt, is looking to add to his positions.
A veteran of debt deals in Argentina and Greece, he is contacting like-minded investors to fashion a unified negotiating strategy.
Since it has been just two weeks since Mr. Maduro said he would renegotiate Venezuela’s debt, a vanguard of dedicated vulture funds has not yet formed, bankers say.
But there is little doubt they are circling.
One, in particular, has been David Martinez, a longtime and somewhat mysterious investor in distressed debt who was involved with Argentina and many earlier workout deals. Others, Mr. Humes believes, will soon follow.
“Over the next five years, Venezuela will be the best emerging-market story out there — this is a fabulously wealthy country,” he said. “It’s all about mean reversion. We are not looking for Venezuela to become a Switzerland. It just has to stop being Zimbabwe.”