CARACAS/LONDON/BOSTON: Venezuela has settled debts with at least three global drug companies by giving them bonds that trade at a heavy discount, a further sign of the OPEC nation's worsening financial crisis.

Novartis AG, Bayer AG and Sanofi SA acquired dollar-denominated bonds from state-owned oil company PDVSA that they resold for as little as a third of their face value, according to a Reuters analysis of regulatory filings and sources with knowledge of the situation. This contributed to some $500 million in foreign exchange losses that the three drug companies suffered in Venezuela in 2015, The extent of the bond transactions has not been previously reported.

For a graphic showing how the bond deals can be a bitter pill for drugs companies.

The payment method provided a shortcut around the country's troubled 13-year-old currency control mechanism. The system is widely regarded as a primary cause of runaway inflation, a deep recession and chronic product shortages that have afflicted Venezuela's economy under socialist President Nicolas Maduro.

Companies are required to sell products in bolivars but then struggle to convert them into hard currency through the government's currency board.

Venezuela tries to use an official exchange rate of 10 bolivars to the dollar for priority goods such as food and medicine. The rate is the result of a devaluation last month from the previous rate of 6.3 bolivars.

However, Venezuela, which gets nearly all of its foreign exchange from oil exports, has had fewer dollars to disburse as a result of the crash in oil prices in the past two years. That has left it without enough dollars to pay down debts to pharmaceuticals companies at the preferential exchange rate.

Few of the alternatives are palatable. They include holding a rapidly deteriorating currency or using a much weaker official exchange rate of 206 bolivars to the dollar. The black market rate is close to an extraordinary 1,100 bolivars to the US dollar, valuing the Venezuelan currency at less than 1 percent of the official rate.

Novartis said it agreed to acquire PDVSA bonds with a face value equivalent to the amount it was owed, and later sold them at a roughly two-thirds discount. Novartis reported a loss of $127 million on its sale of PDVSA 2024 bonds, leaving it with proceeds of just $73 million from the operation. The bonds currently trade at about 31 cents on the dollar, with a yield of 27 percent.

Neither Bayer nor Sanofi provided details on their bond transactions, but sources familiar with the situation said they accepted similar steep discounts. They declined to comment on whether they had any other option for repatriating their funds.

A fixed-income trader who follows the Venezuelan market said he noticed heavy selling of the PDVSA 2024 bonds starting in January, and estimated that more than $500 million of the bonds flooded the market.

This coincided with a sharp drop in the price of the bond, which fell to 25 cents in the dollar from 37 cents. The trader added he did not think financial institutions would have sold the bonds at such low prices. It is unclear whether this was directly related to selling by the drug companies.

Venezuela's Information Ministry, which handles media requests on behalf of the Finance Ministry, did not respond to a request for comment. The Central Bank did not respond to an email seeking comment.

Investors who track Venezuela say the deals makes sense for the companies despite the losses. The bond purchases represented a chance to get dollar denominated assets, even ones that had to be sold at a heavily discounted price.

At the black market rate, Novartis would have been left with only a tiny sliver of what it was owed.