NEW YORK, 8th November 2019 – MUFG and Glass Americas, as the trustee and collateral agent of the PDVSA 2020 bonds, filed a response to PDVSA’s board request to declare the PDVSA 2020 notes “invalid, illegal, null and void”.
While defendants agree in principle with the desire to resolve the case as quickly as reasonably possible, they find the Guaidó-appointed PDVSA board proposed timeline unreasonable, as it would only allow two months for the fact discovery process. As a counter-proposal, defendants consider that a 6-month schedule would be enough to conduct the process in a proper way. While they recognize the deadline represented by the expiration of License 5A on January 22nd, 2020, they argue that the time pressure is primarily the plaintiff’s fault after the “months-long delay” in bringing forward the action.
Regarding PDVSA’s arguments concerning the legality of the 2020 bonds, the defendants argue that:
- The legality of the 2020 bonds under Venezuelan law is immaterial because under the governing indenture, pledge agreement and the 2020 notes themselves, the bonds are governed by New York law
- There are many connections between the notes and both the State of New York and the United States: the notes are denominated in USD, were marketed to U.S. investors, PDVH is a Delaware corporation, and CITGO is based in the U.S.
- Both the indenture and the pledge agreement “included express representations” by PDVSA about the validity of the bonds
- The new PDVSA board has acknowledged the validity and enforceability of the 2020 notes, for example by paying (“under protest”) the coupons of the bond in April
- The allegation that the notes and their pledge required National Assembly approval is not consistent with historical and current practice, as PDVSA and its subsidiaries has incurred in debt for a long time without the need to obtain National Assembly approval.
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