Start Your Engines: Are We Going to See More Creditor Recovery Efforts in Venezuela?

12 Pages Posted: 17 Jun 2018

See all articles by Richard Cooper

Richard Cooper

Cleary Gottlieb Steen & Hamilton LLP - New York Office

Boaz S. Morag

Cleary Gottlieb Steen & Hamilton LLP - New York Office

Date Written: May 29, 2018

Abstract

The past few weeks have seen a step-up in creditor efforts to pursue court judgments and judicial execution on the assets of Petróleos de Venezuela, S.A. (“PDVSA”). Within days of obtaining a $2 billion arbitral award against PDVSA and two subsidiaries, ConocoPhillips Co. initiated enforcement proceedings against PDVSA operating assets in the Netherlands Antilles, and initially obtained various court-ordered attachments there. In the United States, Crystallex should receive a decision by June 30, 2018 whether PDVSA is the alter ego of the Republic, possibly permitting it to enforce its $1.4 billion judgment against PDVSA’s assets in the United States. Further, at least one commercial creditor of PDVSA has reportedly been the first to sue in New York seeking a judgment on a defaulted promissory note, perhaps foreshadowing similar actions by holders of defaulted PDVSA and Republic bonds.

This article first summarizes the magnitude of the claims against PDVSA and the Republic – both those that have been reduced to arbitral awards or judgments and are in various stages of enforcement proceedings, as well as the much larger pool of additional claims that are not (yet) in litigation but could become the subject of judicial proceedings. Next, we provide an update on the pending enforcement proceedings in the United States and elsewhere and the possible ramifications of those proceedings directly for the creditors involved and indirectly for those other PDVSA and Republic creditors watching from the sidelines. The third section provides a report on the status of litigation in Florida brought by a Trust purportedly formed on PDVSA’s behalf which is suing to recover billions of dollars in damages allegedly caused to PDVSA by a decade-long bid rigging and bribery scheme. Finally, the article discusses the implications of the litigation and political news of the last few weeks – including the purported re-election of Nicolás Maduro for another term and the possibility of escalating U.S. government sanctions – for Republic and PDVSA bondholders and other financial creditors who have not initiated any legal actions, but who may decide to do so in the near future.

Keywords: PDVSA, Venezuela, debt restructuring, creditor recovery efforts, bankruptcy, sovereign debt, fiscal crisis, litigation, Latin America, debt, debt crisis

Suggested Citation

Cooper, Richard and Morag, Boaz S., Start Your Engines: Are We Going to See More Creditor Recovery Efforts in Venezuela? (May 29, 2018). Available at SSRN: https://ssrn.com/abstract=3186831 or http://dx.doi.org/10.2139/ssrn.3186831

Richard Cooper (Contact Author)

Cleary Gottlieb Steen & Hamilton LLP - New York Office ( email )

One Liberty Plaza
New York, NY 10006
United States

Boaz S. Morag

Cleary Gottlieb Steen & Hamilton LLP - New York Office ( email )

One Liberty Plaza
New York, NY 10006
United States

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