New York's top court leaves question of PDVSA bonds' validity open
An employee of the Venezuelan state oil company PDVSA at the PDVSA headquarters, in Caracas, Venezuela, December 18, 2023. REUTERS/Gaby Oraa/File Photo Purchase Licensing Rights
NEW YORK, Feb 20 (Reuters) - New York state's top court on Tuesday ruled that Venezuelan law governs whether bonds issued by state oil company Petroleos de Venezuela (PDVSA) are valid, but left the decision over whether the bonds should be deemed invalid up to federal courts.
The New York State Court of Appeals took up the question after Venezuela's opposition - which has controlled PDVSA's U.S. assets, including refiner Citgo Petroleum, since 2019 - argued that PDVSA's bonds maturing in 2020 had not been approved by Venezuela's National Assembly and thus were invalid.
Advertisement · Scroll to continue
The bonds are backed by a 50.1% stake in Citgo Holding, a Delaware-registered entity through which PDVSA owns Citgo.
The bondholders' trustee and collateral agent, MUFG Union Bank and GLAS Americas, countered that the contention that the bonds were illegal under Venezuelan law has no bearing in New York, where they were issued.
A decision invalidating the bonds would be a boost to the opposition's efforts to prevent creditors from seizing control of Citgo, Venezuela's crown jewel overseas asset.
Advertisement · Scroll to continue
U.S. District Judge Katherine Polk Failla initially sided with the bondholders. But the Manhattan-based 2nd U.S. Circuit Court of Appeals later said a section of New York state's commercial code could be interpreted as implying that the validity of a security such as a bond is determined by the local law of the jurisdiction where it is issued.
That court asked the Court of Appeals to consider the question.
In its decision on Tuesday, the Court of Appeals wrote that certain provisions of Venezuela's constitution were relevant to the validity of the securities, but that the application of Venezuelan law had to be "narrowly confined."
"None of this is to say that plaintiffs will ultimately be victorious," the court wrote, referring to PDVSA.
The court said the question of whether the 2020 notes were invalid "is an issue that we must leave for the federal courts to determine."
Advertisement · Scroll to continue
"Even if the validity of the bonds is affirmed, it's very improbable that the guarantee can be sustained," said Yon Goicoechea, a member of the opposition-run committee which controls Venezuela's foreign assets, explaining that under the constitution the guarantee would need to be approved by Venezuelan lawmakers.
The decision comes as a court in Delaware prepares an auction for shares in another one of Citgo's parent companies, PDV Holding, to compensate companies owed money by Venezuela due to expropriations and debt defaults since it nationalized energy and mining companies more than a decade ago.
Reporting by Luc Cohen in New York, additional reporting by Vivian Sequera in Caracas; Editing by Chizu Nomiyama and Rosalba O'Brie
Keine Kommentare:
Kommentar veröffentlichen