A New York federal judge Friday ordered Venezuela's state-owned oil firm Petróleos de Venezuela SA to pay $2.86 billion to bondholders, after ruling last month that defaulted Venezuelan bonds were validly issued under the South American country's laws.
U.S. District Judge Katherine Polk Failla also entered a final judgment dismissing, with prejudice, the oil firm's lawsuit against MUFG Union Bank NA, as trustee for the bonds, and GLAS Americas LLC, as collateral agent.
In doing so, Judge Failla said that there was "no just reason for delay."
The oil firm, known as PDVSA, had sued Union Bank and GLAS Americas in 2019, seeking to have the court declare that certain notes issued following a bond swap transaction were invalid and illegal and thus unenforceable.
In 2020, the district court leaned on New York state law to determine the bonds' validity and granted summary judgment in favor of Union Bank and GLAS Americas.
But after New York's highest court determined in early 2024 that Venezuelan law governed the bonds' validity, the Second Circuit remanded the case to the district court in July of that year to determine whether the bonds were still valid under Venezuelan law.
Last month, Judge Failla ruled that the bonds "were and are valid" following an "exhaustive review of Venezuelan law." Judge Failla again granted summary judgment in favor of the financial firms.
Venezuela had argued earlier this year that the bonds issued by Venezuelan President Nicolás Maduro's administration are illegal because they pledged as collateral a 50.1% stake in Citgo Holding Inc., the parent company of Citgo Petroleum Corp. Citgo Holding, which is Citgo's only shareholder, is wholly owned by PDV Holding, a PDVSA subsidiary.
The Venezuelan National Assembly claims that Maduro improperly failed to obtain its permission before potentially exposing Citgo to creditors.
PDVSA is currently under the control of an ad hoc administrative board appointed by former opposition leader Juan Guaidó.
On Thursday, Union Bank, GLAS and PDVSA told Judge Failla in a letter that they agreed the court should enter a partial final judgment that dismisses PDVSA's complaint, while granting summary judgment on seven counterclaims Union Bank and GLAS had lodged and reserving judgment on four others.
The parties said that they, however, disagreed whether the final judgment should include the amount of fees to which Union Bank and GLAS may be entitled to under their 11th counterclaim asserting breach of contract and indemnification of fees, costs and expenses.
Union Bank, for whom U.S. Bank National is the successor trustee, and GLAS told Judge Failla that as of Thursday, the judgment was worth $2.86 billion, with over $600,000 of prejudgment interest accruing each following day.
They said that PDVSA and its subsidiary PDVSA Petróleo are liable for "fees, disbursements, and expenses, including reasonable attorneys' fees," which they said "at this point total in the tens of millions of dollars."
"The trustee and the collateral agent have been litigating this case for almost six years, during which time they and the 2020 bondholders have been forced to advance tens of millions of dollars in fees and expenses, despite PDVSA and PDVSA Petrόleo's obligation to pay those fees and expenses," Union Bank and GLAS said. "The trustee and collateral agent are entitled to a judgment for these out-of-pocket fees and expenses now, and such a judgment is likely to minimize further proceedings in this court in the future."
PDVSA, meanwhile, told Judge Failla that the court, much like it did in its 2020 ruling, should defer adjudication of the requested attorney fees until after PDVSA's appeal. PDVSA filed a notice on Friday that it was appealing to the Second Circuit.
"This court ruled at the time that 'deferring consideration of the fee petition pending the outcome of plaintiffs' appeal will better conserve both judicial and party resources,'" PDVSA said in the letter. "That conclusion holds equally true today, and defendants offer no persuasive reason to deviate from this court's considered judgment."
Judge Failla on Friday granted PDVSA's request to defer a determination of attorney fees and expenses until the conclusion of any appeal.
In the judgment, Judge Failla said that PDVSA and PDVSA Pétroleo are jointly and severally responsible for the $2.86 billion.
Judge Failla said that PDVSA and PDVSA Pétroleo are also to pay over $609,000 in interest each day after Friday, with that amount changing at later dates.
The bondholders are represented in the litigation by trustee MUFG Union Bank NA and collateral agent GLAS Americas LLC.
MUFG Union Bank and GLAS Americas are represented by Jeff Recher, Paul Paterson, Roberto Gonzalez and Andrew Rosenberg of Paul Weiss Rifkind Wharton & Garrison LLP and Chris Clark, Virginia Tent, Brian Burns and Andrew Rodgers of Clark Smith Villazor LLP.
Petróleos de Venezuela SA and its subsidiary, PDVSA Petróleo SA, are represented by Paul Hastings LLP.
PDVSA subsidiary PDV Holding Inc. is represented by Willkie Farr & Gallagher LLP.
Venezuela is represented by Munger Tolles & Olson LLP.
The case is Petróleos de Venezuela SA et al. v. MUFG Union Bank NA et al., case number 1:19-cv-10023, in the U.S. District Court for the Southern District of New York.
Oct 17
Deal Summary
