Venezuela's International Bondholders Hire Legal Advisors for Restructuring
In a significant move, investors holding Venezuelan international bonds have recruited the legal firm Orrick, Herrington & Sutcliffe to help restructure the country's debt.
Background
In 2017, Venezuela couldn't pay back the money it had borrowed from international investors—a situation termed as a "default." This left the Venezuelan government and its state oil company, PDVSA, with a staggering debt totaling $60 billion.
Who Are The Bondholders?
This group of investors, part of the Venezuela Creditor Committee (VCC), mainly includes:
- Grantham, Mayo, Van Otterloo & Co. LLC
- Greylock Capital
- Mangart Capital
- T Rowe Price Associates, Inc
- Fidelity Investments
They all hold bonds issued by not just the Venezuelan government but also state-owned entities like:
- State-oil company: Petróleos de Venezuela (PDVSA)
- State-power firm: Corporación Eléctrica Nacional
Why Is This Important?
Many of these bonds are now worth very little, often selling at pennies on the dollar because Venezuela has defaulted on its debt. Default means the country failed to make the required payments to its bondholders on time.
Potential Repayments
Apart from the existing $60 billion debt, there's more than $10 billion that Venezuela may owe due to past expropriations—this means the government took control of properties or businesses, often from foreign investors, without paying them back fully.
In Simple Terms
Imagine lending money to a friend who promises to pay you back in a year. If the friend doesn't pay you back at the agreed time (that’s a default), you can’t get your money. However, another friend's lawyer helps you and others who lent money to the defaulter to maybe get some of it back through legal means (restructuring). This is exactly what's happening between Venezuela and the international investors.
Your Takeaway
Investors holding Venezuelan bonds have taken a vital step by hiring legal advisors to manage and possibly recover some of the substantial debt owed to them. This action could spell changes in Venezuela’s financial obligations and affect current and future investors in the region.
By bringing in Orrick, Herrington & Sutcliffe, the bondholders aim to get expert guidance on how to approach this complex and lengthy restructuring process.
Remember: Debt restructuring in simple terms is like when you rearrange or negotiate new payment terms for a debt you owe.
Understanding terminology:
- Default: Not repaying a loan or debt on time.
- Bonds: A type of loan where the bond issuer owes the holders and must pay back with interest.
- State-owned entities: Companies owned by the government.
- Expropriations: When the government takes private property for public use, potentially without paying its full value.
