Holders of Venezuela bonds are seeking to get a judgment before restructuring and possible activation of the collective-action clause.
Bondholders litigating Venezuela bonds in the U.S. court filed last week their opposition to a motion for an indefinite stay submitted by Venezuela and affecting cases regarding debt market securities defaulted in 2017-2018. The holders of these notes revealed part of their strategy to secure a judgment to protect their positions from the application of collective action clauses (CACs) and get full repayment. Most Venezuela bonds contain 75% – 85% CACs that will force creditors to accept conditions agreed with such majority of creditors, limiting the possibility of holdouts.
Pharo, holder of 2019’ 7.75% notes with 75% CAC argued that getting a judgment would protect them from compulsory restructuring under CACs, therefor a continued stay will constitute prejudice against their right to full repayment. Just a handful of bondholders have filed against Venezuela and PDVSA, while the U.S. sanctions and the political crisis prevent a debt restructuring process.