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posted by Stephen Lubben

John Dizard has a useful, and clearly written, piece on the lay of the land in this morning's FT. What puzzles me is why PDVSA, the national oil company,  has not done a UK scheme of arrangement or a US prepack to exchange the bonds, instead of messing around with an exchange offer. But the entire situation is rather opaque.


How could PDVSA, an instrumentality of a foreign government, gain access to the U.S. bankruptcy courts to use a U.S. prepack to exchange its bonds?

Paywall prevents seeing John Dizard's article.

With regard to the first comment, I know of no prohibition on filing a foreign corporation owned by a foreign government. And presumably V. can make PDVSA's legal status be whatever it wants it to be under local law. Of course, V. might not want to risk losing control ...

I spent some time with the definitions of "person," "governmental unit," and "municipality." Under section 109, a chapter 11 debtor must be a "person." "Governmental units" are excluded from the definition of person with some minor exceptions related to service on creditors' committees. "Governmental unit" is defined to include instrumentalities of a foreign state. Certainly a corporation wholly owned by a foreign government would itself be a "governmental unit," and therefore not a person eligible to file chapter 11. Maybe V. could try to monkey around with PDVSA's status, but you have to figure that there would be massive eligibility litigation.

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