Oil for Debt: A Unique Proposal for the Unique Challenge that is Restructuring Venezuela's Debt

19 Pages Posted: 29 Apr 2018  

Aditya Mitra

Duke University, School of Law, Students

Andres Ortiz

Duke University, School of Law, Students

Bernard Botchway

University of North Carolina at Chapel Hill, School of Law, Students

Evaristo Pereira

Duke University, School of Law

Shane O'Neill

University of North Carolina at Chapel Hill, School of Law, Students

Will Curtis

University of North Carolina at Chapel Hill, School of Law, Students

Date Written: April 9, 2018

Abstract

This proposal offers a unique solution for a unique challenge: using oil to pay for Venezuela’s debt. Venezuela and PDVSA’s creditors currently receive little in the way of coupon payments and have minimal means of recourse over limited assets located outside Venezuela’s borders. We suggest using a creditor trust to consolidate creditors into a single entity that would purchase the oil from Venezuela with bonds tendered by the creditors to the trust. This transaction would give the creditors trust a priority claim over oil as title holders. It allows a restructuring process with relatively few changes to current bonds, thus reducing the possibility of litigation. In addition to the legal and structural benefits offered to both Venezuela and the creditors, this proposal offers something that no other proposal does — the potential for successful execution under current U.S. sanctions based on the issuance of a specific license from OFAC. Although there is no assurance as to whether such license would be obtained, it is arguable that this structure runs outside the scope of the Executive Order No. 13,808, and that there is precedent supporting the issuance of such a license authorizing commercial transactions.

Keywords: Sovereign; Venezuela; Restructuring; Sanctions; Debt

Suggested Citation

Mitra, Aditya and Ortiz, Andres and Botchway, Bernard and Pereira, Evaristo and O'Neill, Shane and Curtis, Will, Oil for Debt: A Unique Proposal for the Unique Challenge that is Restructuring Venezuela's Debt (April 9, 2018). Available at SSRN: https://ssrn.com/abstract=3159462 or http://dx.doi.org/10.2139/ssrn.3159462

Aditya Mitra

Duke University, School of Law, Students ( email )

Durham, NC
United States

Andres Ortiz

Duke University, School of Law, Students ( email )

Durham, NC
United States

Bernard Botchway

University of North Carolina at Chapel Hill, School of Law, Students ( email )

Chapel Hill, NC
United States

Evaristo Pereira (Contact Author)

Duke University, School of Law ( email )

Durham, NC
United States

Shane O'Neill

University of North Carolina at Chapel Hill, School of Law, Students ( email )

Chapel Hill, NC
United States

Will Curtis

University of North Carolina at Chapel Hill, School of Law, Students ( email )

Chapel Hill, NC
United States

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