Caracas, August 10, 2023 (venezuelanalysis.com) – Venezuelan opposition politicians have endorsed the extension of the validity of defaulted debt instruments issued by the Venezuelan government and state oil company PDVSA.
The defunct 2015 National Assembly announced its decision over a Zoom call on Tuesday.
The accord, which still requires approval from the US Treasury Department, suspends an upcoming statute of limitations on Venezuelan bonds, thus deterring legal claims and leaving open the possibility of debt renegotiations.
Hans Humes, chairman of the Greylock Capital Management group that owns more than $10 billion in Venezuelan debt, praised the move amidst a “legal quagmire” caused by Washington’s Venezuela policies.
For his part, Claudio Zampa, a member of the Venezuela Creditors Committee (VCC), called the decision “responsible and far-sighted.” The VCC likewise holds around $10 billion worth of bonds.
The opposition-controlled parliament saw its term expire in January 2021 but has unilaterally renewed its term in subsequent years with support from the US. It is the only political body recognized by Washington and it recently received a US Treasury license allowing it to negotiate settlements with creditors.
The Trump and Biden administrations had previously backed the self-proclaimed “interim government” led by Juan Guaidó since 2019. In late 2022, the 2015 opposition National Assembly voted to dissolve the parallel administration. However, it retains control over certain Venezuelan foreign assets.
The Nicolás Maduro government stopped servicing debt in November 2017 as a result of US sanctions that locked Venezuela out of financial markets.
In the years since, Caracas has repeatedly called for debt renegotiations and reaffirmed its zealous stance to honor commitments. Nevertheless, the fact that most high-ranking officials have been blacklisted by the US Treasury Department saw creditors avoid engaging with the administration.
Venezuela’s state and PDVSA bonds are subjected to New York law, which stipulates a six-year statute of limitations after which bondholders cannot file claims to collect on unpaid debt.
In late March, the Venezuelan Finance Ministry and PDVSA announced the suspension of the litigation deadline on Venezuelan bonds until 2028 or until the lifting of US sanctions allowed for restructuring talks. Reuters reported that creditor groups lobbied the opposition to back the proposal given its recognition by the US government.
According to Bloomberg, the defaulted bonds are worth around US $60 billion, with $30 billion in accrued interest since 2017.
While the latest developments may have staved off a wave of lawsuits, a Cayman Islands-based hedge fund is pressing forward to collect on unserviced Venezuelan bonds.
In documents seen by Venezuelanalysis, three subsidiaries of the Pharo group have requested that two claims worth $1.7 billion in total be attached to an ongoing auction of shares belonging to Venezuela’s CITGO that was ordered by a Delaware court in order to pay creditors.
CITGO, a US-based refiner worth $10-13 billion which is a subsidiary of PDVSA, risks being broken up to satisfy a number of international arbitration awards granted to multinational corporations as compensation for assets nationalized in Venezuela.
Claimants include oil giant ConocoPhillips and Canadian miners Crystallex and Rusoro, with the total owed amount exceeding $6 billion.
Apart from the Delaware proceedings, CITGO is also liable to owners of the defaulted PDVSA 2020 bond, with 50.1 percent of shares of the subsidiary pledged as collateral. The US Treasury Department has issued temporary bans on transactions involving the bond.
Additionally, ConocoPhillips secured a default ruling to enforce a second award worth $8.5 billion, which remains under appeal at the World Bank’s International Centre for Settlement of Investment Disputes (ICSID).
The opposition-appointed CITGO board is presently pursuing out-of-court settlements with both Delaware claimants and PDVSA 2020 holders.
In its request for a writ of attachment, Pharo lawyers referred to the recently upheld “alter ego” ruling that makes PDVSA, and its subsidiaries, liable for debts incurred by the Venezuelan state. They also pointed out that the US-recognized opposition parliament remains in control of PDVSA’s assets abroad.
After securing an initial amount of $380 million in 2020, the Pharo subsidiaries secured a further $1.3 billion in a New York court in October 2021 after lawyers representing the “interim government” failed to appear.
Guaidó and his associates have drawn criticism over their handling of Venezuela’s foreign assets, with accusations of negligence, collusion and conflicts of interest.