3 posts from October 2020

SDNY Upholds Pledge of Collateral for PDVSA 2020s

posted by Mark Weidemaier

Today, Judge Failla of the Southern District of New York issued an opinion rejecting PDVSA's request for a declaration invalidating the PDVSA 2020 bonds. These bonds, which we've written about before (e.g., here, here and, here) are backed by a pledge of 50.1% of the equity in Citgo Holding. The argument for invalidating the bonds contends that the 2016 exchange offer and collateral pledge was a contract in the "national public interest," which, under Venezuelan law, required but did not receive the approval of the National Assembly. PDVSA argued, first, that under the act of state doctrine, the court had to defer to a series of National Assembly resolutions declaring the exchange offer invalid. It also argued that Venezuelan law governed disputes over the validity of the contract, even though the governing law clause in the bonds specified New York law.

The district judge rejected these arguments in a lengthy and thoughtful opinion. (There is one clear but fairly tangential mistake, when the opinion implies on p. 59 that PDVSA is neither a "foreign state" nor an agency or instrumentality of a foreign state for purposes of the Foreign Sovereign Immunities Act.*) On the governing law question, the judge ultimately decided that New York law applied because--to oversimplify a bit--New York had a significant connection to the transaction. The bonds were negotiated and paid in New York, etc. For more on this conflict of laws issue, see here.

I'd expect to see an appeal, although whether that will benefit PDVSA (even if just by giving it more time) will probably depend on whether the district judge or court of appeals issues a stay of the current order. [edit: And of course on further developments in the U.S. sanctions regime.]

*Technically, the court said only that neither party argued that PDVSA was such an entity. The court made this point to help it distinguish FSIA cases that supported PDVSA's position. But this is no distinction at all. It is beyond dispute that PDVSA is an agency or instrumentality of Venezuela (or is indistinguishable from the government if treated as its alter ego). In either case, the FSIA unquestionably applies to PDVSA, so it is not obvious why cases under the FSIA would be irrelevant to the dispute.

Taub's New Book on White Collar Crime (and its connection to bankruptcy)

posted by Pamela Foohey

Big Dirty MoneyI just finished Professor Jennifer Taub's new book, Big Dirty Money: The Shocking Injustice and Unseen Cost of White Collar Crime. The book has been out for a couple weeks and it's already receiving rave reviews. I'm a bit late to the party. But I wanted to add my praise to the chorus. And add a shout out to bankruptcy's place in the dealing with the cost of white collar crime. Taub's introduction starts with three quick examples: the Sackler family, Pacific Gas & Electric, and General Motors. The examples aren't about their bankruptcy cases. They are about actions prior to their chapter 11 filings which had to be worked out in bankruptcy. As I read, I thought -- that ended in bankruptcy, so did that, and, yep, bankruptcy for that one too. Taub's book, of course, is not about bankruptcy. But if you're interested in white collar crime backstories of some headliner bankruptcy filings, this book will help make those connections. And it will elucidate the big business of white collar crime in a captivating read. In short, highly recommended.

New Greek Bankruptcy Code

posted by Jason Kilborn

Responding to an EU Directive and what was likely already a long-simmering plan to revise a not entirely satisfactory patchwork of constantly shifting bankruptcy and insolvency laws, the Greek government recently released a draft of a new Code for Debt Settlement and Second Chance. A webinar earlier this week hosted by Capital Link offered a rare insight into this developing legislation, introduced by the architects of the new law. If all goes as planned in the legislature, the new Code will become effective in 2021. Watch for much more of this type of activity in other European countries in the months ahead.

Contributors

Current Guests

Follow Us On Twitter

Like Us on Facebook

  • Like Us on Facebook

    By "Liking" us on Facebook, you will receive excerpts of our posts in your Facebook news feed. (If you change your mind, you can undo it later.) Note that this is different than "Liking" our Facebook page, although a "Like" in either place will get you Credit Slips post on your Facebook news feed.

News Feed

Categories

Bankr-L

  • As a public service, the University of Illinois College of Law operates Bankr-L, an e-mail list on which bankruptcy professionals can exchange information. Bankr-L is administered by one of the Credit Slips bloggers, Professor Robert M. Lawless of the University of Illinois. Although Bankr-L is a free service, membership is limited only to persons with a professional connection to the bankruptcy field (e.g., lawyer, accountant, academic, judge). To request a subscription on Bankr-L, click here to visit the page for the list and then click on the link for "Subscribe." After completing the information there, please also send an e-mail to Professor Lawless (rlawless@illinois.edu) with a short description of your professional connection to bankruptcy. A link to a URL with a professional bio or other identifying information would be great.

OTHER STUFF