Venezuela’s finance minister on Tuesday 15 September 2020 offered to speak with bondholders about a potential renegotiation of the cash-strapped country’s debt, which economists and financial industry sources said would face challenges due to U.S. sanctions.
The OPEC nation in 2017 suspended payments to holders of many bonds issued by the government, state oil company Petroleos de Venezuela and utility Electricidad de Caracas, and sought to initiate a restructuring process. But that process got derailed by an escalating political crisis in Venezuela, in the midst of a six-year economic collapse, as well as U.S. sanctions aimed at ousting President Nicolas Maduro that barred U.S. citizens and companies from meeting with Venezuelan officials.
In a state television address, Finance Minister and Executive Vice President Delcy Rodriguez announced a “conditional offer” for bondholders for a deal that would suspend statutes of limitation contained in the bond agreement.
Rodriguez asserted that those statutes were close to expiring, at which point the bondholders would lose certain legal rights as creditors. As venezuelacreditors.com reported, with the third-year anniversary of Venezuela’s default fast approaching in November 2020, investors face the risk of losing their legal entitlement to accrued interest on bonds, whose prescription is described with unclear language in a vague clause buried in the bond indenture, Bloomberg first reported in the beginning of 2020.
In return, bondholders would have to agree not to sue Venezuela or either of the two companies, or suspend any ongoing litigation. Delcy Rodriguez said the offer aimed to “guarantee that investors are not affected by the illegal actions taken by those who hold power in the United States.” In addition to the sanctions – which could prevent bondholders from even meeting with Venezuelan officials – many of the bonds were issued under New York state law.
The Trump administration and many U.S. courts have recognized opposition leader Juan Guaido, not Maduro, as Venezuela’s rightful leader. “There is no legal validity to any restructuring document issued by Nicolas Maduro’s government,” said Francisco Rodriguez, a Venezuelan economist who has advised bondholders. Washington has sanctioned PDVSA, as well as Venezuela’s central bank and top officials, to try to force Maduro – accused of corruption and human rights violations – to resign. Guaido, who presides over the opposition-held National Assembly, last year assumed a rival presidency on the basis that Maduro had rigged his 2018 re-election. Maduro blames Venezuela’s economic woes on U.S. sanctions and accuses Washington of seeking to seize control of the South American country’s oil reserves.
Delcy Rodriguez, the finance minister, said bondholders had until midnight on Oct. 13 to express their interest to the government, and encouraged investors to seek permission from U.S. authorities to engage in a potential deal despite the sanctions. Jose Guerra, an opposition lawmaker who sits on the National Assembly’s finance committee, called the announcement “divorced from reality” and said it was not viable without a plan to restructure Venezuela’s economy and oil industry. The government did not immediately respond to a request for comment on Guerra’s criticism.
The disputed existence of two administrations (Guaido v. Maduro) has added another layer of complexity to the matter. Even the July 2020 ruling by the English High Court that Britain has recognised Venezuela’s opposition leader Juan Guaido as the country’s president, did not add much more clarity as to the practical implications of the decision, while the political and economic situation in the country has continued to deteriorate progressively.
Under the leadership of IlliquidX, a group of investors who hold claims against the Republic of Venezuela, PDVSA (the state-owned oil company) and ELECAR (the electricity utility company of Caracas) are organising themselves, aiming to obtain an amicable understanding with the authorities of Venezuela regarding the protection of their contractual rights on past due obligations.
The group has also appointed Reynolds Porter Chamberlain LLP, a leading UK law firm with vast experience in sovereign debt matters, and Prof. Rodrigo Olivares-Caminal, an international sovereign debt consultant expert who is currently heading the Cuba ad-hoc creditor committee, to facilitate the conversations and supervise further developments.
Please find below, the next interest prescription deadlines for Venezuela bonds:
| Credit | Type / ISIN | Capital Prescriptions (in years) | Interests Prescription (in years) | Interest Prescription Deadline |
| VENZ 7 3/4 10/13/19 | USP97475AN08 | 10 | 3 | 13/10/2020 |
| VENZ 8 1/4 10/13/24 | USP97475AP55 | 10 | 3 | 13/10/2020 |
| VENZ 7.65 04/21/25 | XS0217249126 | 10 | 3 | 21/10/2020 |
| VENZ 11 3/4 10/21/26 | USP17625AE71 | 10 | 3 | 21/10/2020 |
| VENZ 9 05/07/23 | USP17625AA59 | 10 | 3 | 7/11/2020 |
| VENZ 9 1/4 05/07/28 | USP17625AB33 | 10 | 3 | 7/11/2020 |
| VENZ 7 12/01/18 | USP97475AD26 | 10 | 3 | 1/12/2020 |
| VENZ 6 12/09/20 | USP97475AG56 | 10 | 3 | 9/12/2020 |
| VENZ 6 1/2 12/29/36 | USP97475AQ39 | 10 | 3 | 29/12/2020 |