(Updated) About That Mysterious Crystallex Settlement

[Update: Here is the unsealed letter describing the settlement between Crystallex and Venezuela. As expected, it reveals nothing of note, simply explaining that the settlement's terms require confidentiality and redacting portions discussing the settlement itself. Also, note that the first paragraph of the original post (below) has been edited for clarity.]

We have covered Crystallex’s attempt to enforce its $1.2 billion judgment against Venezuela a bunch here on Credit Slips (for example, here, here, here, here, and here). In late November, the parties reached a settlement, shortly before a December 5 hearing in Crystallex's lawsuit seeking to attach assets belonging to PDVSA. The hearing was to address Crystallex's argument that PDVSA is the government's alter ego, and PDVSA’s cross motion to dismiss. A ruling in Crystallex’s favor would have let it look to PDVSA’s assets to satisfy its judgment against the government. As noted in the Financial Times, a pro-Crystallex ruling might also have had broader implications, potentially letting “holders of defaulted Venezuelan sovereign bonds ... seek to seize PDVSA assets, potentially including those of Citgo.”

The settlement is a bit mysterious. Documents related to it were filed under seal, both in Crystallex’s bankruptcy case in Canada and its lawsuit in Delaware federal court. Crystallex’s debtor-in-possession financier is entitled to much of the settlement proceeds. Here's a report from Ernst and Young—the court-appointed monitor—describing the settlement’s virtues. If you have x-ray vision, you can review the settlement terms at par. 26; if not, you’ll just see redacted text. As reported, Crystallex will receive something close to the face value of its judgment, but paid over time. As Bloomberg notes (tongue firmly in cheek, I suspect): “The payment delays put in question how Crystallex will get paid.” The benefit to the government is equally questionable. For now, the settlement defers the hearing on Crystallex’s alter ego claims, which has been continued until Dec. 21. But it’s not like the government and PDVSA get long-term peace. Even if the settlement moots Crystallex’s alter ego claims, any creditor can replicate its litigation strategy. So the government gets only a temporary hiatus, and why should that justify such a generous settlement (at least in nominal value)?

Anyway, the Latin American Herald Tribune (owned and published by Russ Dallen, who also runs investment bank Caracas Capital) asked the federal judge in Delaware to unseal documents related to the settlement, and the judge agreed. Well, sort of. A little bit. In principle. The parties had jointly filed a sealed letter describing the settlement. The judge has instructed them to re-file by the end of the day today, making only redactions “consistent with the governing law and the Court's rules.” But I would be surprised if the new filing dispels confusion about the settlement. The public has a general right of access to judicial proceedings (whether framed as a common law right or as a first amendment right), but parties are nevertheless allowed to file documents under seal when there is a compelling reason to do so. As an initial matter, I would expect the document filed today to contain significant redactions, leaving much about the settlement unclear. And while the judge can order further disclosure, there’s no guarantee that this will happen.

I will update this post once a copy of the letter appears on the court's docket, and we’ll see if the mystery clears up. For now, however, I’m skeptical that whatever document gets filed today will provide much clarity.