PDVSA's Hail Mary: A Chapter 15 Bankruptcy Solution

16 Pages Posted: 30 Apr 2018  

Rich Gittings

University of North Carolina School of Law; Sanford School of Public Policy

Samantha Hovaniec

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

Ryan Nichols

University of North Carolina School of Law

Matthew Taylor

Independent

Heather Werner

Independent

Date Written: April 12, 2018

Abstract

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

Suggested Citation

Gittings, Rich and Hovaniec, Samantha and Nichols, Ryan and Taylor, Matthew and Werner, Heather, PDVSA's Hail Mary: A Chapter 15 Bankruptcy Solution (April 12, 2018). UNC Legal Studies Research Paper. Available at SSRN: https://ssrn.com/abstract=3161604 or http://dx.doi.org/10.2139/ssrn.3161604

Rich Gittings

University of North Carolina School of Law ( email )

Van Hecke-Wettach Hall, 160 Ridge Road
CB #3380
Chapel Hill, NC 27599-3380
United States

Sanford School of Public Policy ( email )

201 Science Drive
Box 90312
Durham, NC 27708-0239
United States

Samantha Hovaniec (Contact Author)

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

Chapel Hill, NC
United States

Ryan Nichols

University of North Carolina School of Law ( email )

Van Hecke-Wettach Hall, 160 Ridge Road
CB #3380
Chapel Hill, NC 27599-3380
United States

Matthew Taylor

Independent ( email )

No Address Available

Heather Werner

Independent ( email )

No Address Available

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