Holders of Venezuela’s defaulting bonds and the country’s U.S.-recognized opposition are using a court in New York to protect a debt extension deal.
A group of investors with more than US$10 billion in sovereign bonds and the state oil company began a legal maneuver on Wednesday that aims to guarantee that an extension of the debt statute of limitations cannot be subsequently challenged by a new Venezuelan Government. The so-called “toll” period, or suspension, announced this year suspended the statute of limitations on debt until 2028 to avoid an avalanche of litigation.
The settlement involves filing precursors to lawsuits over the defaulted debt with the New York Supreme Court while also agreeing to dismiss the actions. The measure aims, in part, to solidify the “tolling” agreement by having a New York judge recognize it.
The Venezuelan Creditors Committee said in a statement that it is committed to working constructively with all parties with the ultimate goal of ensuring the orderly and equitable future restructuring of bond debt, while avoiding unnecessary litigation. He added that the filings represent a coordinated effort to pursue the goal while preserving investor rights.
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The agreement aims to end confusion among bondholders over whether the US would recognize the “tolling” agreement. The National Assembly, led by the opposition and authorized by the US to represent Venezuela in court, issued the offer in August. President Nicolás Maduro made a similar suspension offer earlier this year, but it could not be enforced because the US does not recognize his government.
Venezuela defaulted on more than $60 billion in global bonds in 2017. Restructuring efforts have been hampered by sanctions, restrictions on debt purchases and the US severing relations with Maduro.
Washington and Caracas are nearing a deal that would provide relief from some sanctions in exchange for measures to ensure fair elections in the country, Bloomberg reported Tuesday.
Translated by Bárbara Briceño.