This is a joint post by Mark Weidemaier and Mitu Gulati
In a previous post, we talked about how ordinary corporate-law principles, and especially the rules concerning piercing the corporate veil, might play an important role in any debt restructuring conducted by Venezuela or PDVSA, the state oil company. As an example, we cited the fact that PDVSA doesn't own the oil reserves it exploits and the possibility that Venezuela might transfer the right to exploit these reserves to a new entity. Readers who have been following the Venezuelan crisis will recognize that we were not-too-subtly referring to a proposal floated back in October 2016 by Ricardo Hausmann and Mark Walker, writing on Project Syndicate. (Registration required.) In a nutshell, their proposal with regard to PDVSA is that Venezuela can induce PDVSA creditors to participate in a restructuring--conducted either in bankruptcy or through the use of exit consents--by withdrawing or modifying PDVSA's right to exploit hydrocarbon reserves. Essentially, that is, Venezuela can strip the company of its primary productive asset.