Venezuela, Creditors Seek Court Blessing of Bond Standstill

Jeremy Hill
·2 min read

(Bloomberg) -- Holders of Venezuela’s defaulted bonds and the country’s US-recognized opposition are using a court in New York to protect a debt standstill agreement.

Most Read from Bloomberg

A group of investors with more than $10 billion of sovereign and state oil company bonds began a legal maneuver Wednesday aimed at ensuring an extension to debt deadlines can’t be later challenged by a new Venezuelan government. The so-called tolling period announced this year suspended the statute of limitations on the debt until 2028 to avoid a flood of litigation.

The deal involves filing in New York Supreme Court the precursors to lawsuits over the defaulted debt and, at the same time, agreeing to dismiss the actions. It’s designed, in part, to cement the tolling arrangement by having a New York judge acknowledge it.

A group called the Venezuela Creditor Committee said in a statement it’s “committed to working constructively with all parties with the ultimate goal of ensuring the future orderly and equitable debt restructuring of the bonds, while avoiding unnecessary litigation. Collectively, today’s filings represent a coordinated effort to pursue this goal while preserving investors’ rights.”

Venezuela’s opposition-led committee in charge of foreign assets didn’t reply to a request for comment.

The deal is aimed at ending confusion among bondholders about whether the US would recognize the tolling arrangement. The opposition-led National Assembly, authorized by the US to represent Venezuela in court, issued the offer in August. President Nicolas Maduro made a similar tolling offer earlier this year, but it was not enforceable because the US doesn’t recognize his government.

Venezuela began defaulting on more than $60 billion of global notes in 2017. Restructuring efforts have been stymied by sanctions, restrictions on buying the debt and the US cutting ties with Maduro.

Washington and Caracas are closing in on a deal that would provide some sanctions relief in exchange for steps to ensure fair elections in the country, Bloomberg reported Tuesday.

The deeply distressed bonds have risen slightly in the wake of reports starting in August of re-engagement between Venezuela and the US. PDVSA bonds are now trading above six cents, a two cent jump over the time period, while sovereign notes are now as high as 11 cents from around 9 cents, according to traders and data compiled by Bloomberg.

--With assistance from Nicolle Yapur and Robert Burnson.

(Updates with opposition committee in fifth paragraph, bond prices in the last paragraph)

Most Read from Bloomberg Businessweek

©2023 Bloomberg L.P.