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.
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4 responses to “Venezuela”
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.