CARACAS/HOUSTON (Reuters) - Venezuelan state oil firm PDVSA has issued at least $310 million in debt to companies including General Electric Co as it negotiates private issuances to pay off its suppliers, industry sources told Reuters, stretching the finances of a company that bondholders already worry is on its way to default.

A gas station of state oil company Petroleos de Venezuela (PDVSA) is seen in Caracas, February 18, 2016. REUTERS/Marco Bello

The securities are not bonds but offer rights similar to those enjoyed by bondholders, and at least one issue offers dispute resolution via the Paris-based International Chamber of Commerce, according to one of the three sources, who cited a term sheet.

This means that if PDVSA defaults, investors holding their bonds may find that there are more creditors competing for compensation than they had originally anticipated.

The overall negotiations on private debt issuance, which were confirmed by seven sources, come as weak oil markets and an unraveling socialist economy have fanned concerns PDVSA will be unable to make nearly $5 billion in bond payments between now and the end of the year. PDVSA and Venezuelan President Nicolas Maduro insist they will meet all debt obligations and dismiss default rumors as a right-wing conspiracy.

In addition to the $310 million, a package of $1.5 billion in such securities maturing in three to five years is being discussed as a way of settling debts with small and medium-sized oil services firms, according to one of the sources, who was briefed on that proposal.

PDVSA is struggling to prevent oil services providers from stopping work in Venezuela in protest over billions of dollars in unpaid bills.

The company has worked with banks including Deutsche Bank AG to structure fixed-income securities such as promissory notes that can be sold to investors, according to one of the sources, a local trader who saw documents outlining the proposal.

“PDVSA has been offering promissory notes as well as other types of notes and financial instruments to settle debts with providers,” said another of the seven sources, who was also involved in one such operation.

“They are offering them because there is no cash.”

Deutsche and GE declined to comment. PDVSA did not respond to an email seeking comment. The sources spoke on condition of anonymity because the negotiations are ongoing or because they are not authorized to comment publicly on the matter.

The total amount of such securities that have already been issued by PDVSA could not immediately be determined.

BACKED-UP BILLS

Promissory notes would typically be unattractive for oil services companies to keep on their own books. They are seen as too risky for many investment portfolios, because they trade in limited volumes and are therefore difficult to sell.

As a result, they are generally structured by large foreign banks that ultimately end up buying the notes at a steep discount, according to another of the sources, who works in the finance industry.

GE has agreed to convert $350 million in unpaid PDVSA invoices into $257 million in loan notes, which are interest-bearing securities that can be sold to other investors, a GE source told Reuters.

An oil industry source said that one company accepted $53 million in promissory notes that come due at the end of this year, asking that the company not be identified to avoid creating conflict with PDVSA. The notes are not registered with settlement agents such as Euroclear, the source added.

Since the 2008 financial crisis, PDVSA has systematically allowed bills to pile up and later negotiated discounts with providers or paid them with global bonds which sell at a discount. Debts to providers in 2014 reached nearly $21 billion, according to that year’s financial statements.

PDVSA has not yet released 2015 results.

The company has not made any cash payments in dollars to providers in at least six months as a result of its difficult cash-flow situation, according to two of the sources. It has not been able to issue bonds on capital markets because of prohibitively high yields.

Converting the unpaid bills into securities does not increase PDVSA’s total debt burden.

But it does have significant consequences in the event of a default, since the debt changes from a private obligation between two parties into a security held by investors.

Payment difficulties led Schlumberger, the world’s top oil services company, to announce in April that it was halting operations in Venezuela.

In response to an email seeking details, a Schlumberger official said the company was not in a position to discuss the issues because it considers them confidential.

Services giant Halliburton also said it was reducing activities in Venezuela, without saying why. It said in its 2015 annual report that at the end of last year it had $31 million in surety bond guarantees associated with its Venezuelan operations, without providing details.

Halliburton declined to comment.