NEW YORK- A New York appeals court on Wednesday overturned a court ruling in favor of bondholders of state-owned oil company Petróleos de Venezuela (PDVSA), a decision that for the moment protects its U.S. subsidiary, Citgo.
The Second Circuit Court of Appeals in Manhattan said U.S. District Judge Katherine Polk Failla should have applied Venezuelan law rather than New York law in assessing the claims of the oil company’s bondholders.
The judge had ruled in favor of the plaintiffs MUFG Unión Bank, NA and Glas Américas, declaring PDVSA in default and ruling that the company had to compensate them with 1.7 billion dollars.
The story goes back to 2007, when the Venezuelan state oil company issued the first of a series of promissory notes totaling $9.15 billion due in 2017.
Between 2007 and 2016, several credit rating agencies downgraded PDVSA’s rating.
In 2016, with the repayment of capital on the horizon, PDVSA offered to exchange the 2017 notes for new notes due in 2020, but backed by 50.1% of PDV Holding, the US subsidiary of the oil company and the sole shareholder of the Citgo company that operates in the United States.
This ruling gives a respite to the American company, which was going to be auctioned off to compensate its creditors.
During the period in which Nicolás Maduro and the interim president Juan Guaidó, recognized by a large part of the international community, coexisted, PDVSA stopped making scheduled capital and interest payments, following the decision of the Venezuelan National Assembly, controlled by the opposition.
Now, the Court of Appeals has determined that the 2020 notes “are governed by the local jurisdiction of the issuer.”
“The district court erred in holding otherwise, and we therefore vacate the judgment” and “remand (the case) for further consideration,” the court concluded.
Source: With information from AFP
