PDVSA's Hail Mary: A Chapter 15 Bankruptcy Solution
16 Pages Posted:
Date Written: April 12, 2018
A Chapter 15 bankruptcy is the best option for restructuring PDVSA’s debts because it would provide PDVSA with benefits that no other restructuring can offer—it would protect PDVSA’s assets and restructure its debts through one unified process. Venezuela could enact a Chapter 15 solution in four steps: (1) create a Venezuelan public-sector bankruptcy law, (2) comply with Chapter 15’s eligibility requirements, (3) obtain recognition by U.S. courts for PDVSA’s bankruptcy proceeding, and (4) confirm a bankruptcy plan that can be enforced by U.S. courts. The barriers for each step are high, but examples from other countries suggest it is possible a Chapter 15 restructuring would be successful.
Even if PDVSA is unable to confirm a bankruptcy plan, PDVSA would receive significant benefits at each stage in the process. A Chapter 15 proceeding could provide a stay to protect PDVSA’s assets from creditors as well as protect its non-Venezuelan entities, such as CITGO. Additionally, at each stage bankruptcy gives PDVSA leverage over creditors to make a restructuring deal out of court. Because of the unique benefits offered by Chapter 15, it is PDVSA’s Hail Mary—it comes with definite risks, but the potential for a high payoff.
Keywords: PDVSA, Venezuela, Bankruptcy, Chapter 15
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