Latin American Herald Tribune: Venezuela Supreme Court asked to Rule if Venezuela & Pdvsa Can Pay US Dollar Bonds in Bolivars

venz-bolivars“Both of the 2017 PDVSA bond contracts do mention the payment of the coupons and maturities in other currencies,” says Russ Dallen, Portfolio Manager of the Venezuela Opportunity Fund. “But they also require that it be the equivalent and that bondholders are made whole. That will be difficult with Bolivars.”

Dallen points out the following excerpt from the PDVSA 8.5% of November 2, 2017 bond contract:

Currency Indemnity

U.S. Dollars are the sole currency of account and payment for all sums payable by the Issuer under the Notes and the Indenture. Any amount received or recovered in a currency other than U.S. Dollars in respect of the Notes (whether as a result of, or of the enforcement of, a judgment or order of a court of any jurisdiction, in the winding-up or dissolution of the Issuer, any Subsidiary of the Issuer or otherwise) by the Holder in respect of any sum expressed to be due to it from the Issuer shall constitute a discharge of the Issuer only to the extent of the U.S. dollar amount which the recipient is able to purchase with the amount so received or recovered in that other currency on the date of that receipt or recovery (or, if it is not practicable to make that purchase on that date, on the first date on which it is practicable to do so). If that U.S. Dollar amount is less than the U.S. Dollar amount expressed to be due to the recipient under any Note, the Issuer shall indemnify the recipient against the cost of making any such purchase. If that U.S. Dollar amount is more than the U.S. Dollar amount expressed to be due to the recipient under any Note, such recipient will promptly remit the excess to the Principal Paying Agent who, in turn, will remit such amount to the Issuer. For purposes of this indemnity, it will be sufficient for the Holder to certify (indicating the sources of information used) that it would have suffered a loss had the actual purchase of U.S. Dollars been made with the amount so received in that other currency on the date of receipt or recovery (or, if a purchase of U.S. Dollars on such date had not been practicable, on the first date on which it would have been practicable).

The above indemnity, to the extent permitted by law:

  • constitutes a separate and independent obligation from the other obligations of the Issuer;
  • shall give rise to a separate and independent cause of action;
  • shall apply irrespective of any waiver or indulgence granted by any Holder; and
  • shall continue in full force and effect despite any other judgment, order, claim or proof for a liquidated
  • amount in respect of any sum due under any Note or any other judgment.

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