On 25 November 2018, Venezuela struck a USD 1.4bn deal to save shares of Citgo Petroleum Corp. belonging to state-owned Petroleos de Venezuela SA (“PDVSA”) from seizure by creditor Crystallex International Corp. Crystallex, a Canadian mining corporation, had successfully obtained an order from the US District Court for the District of Delaware granting it the right to seize PDVSA’s US assets of Citgo as part of an arbitration award. The award resulted from a decade-long dispute over Venezuela’s 2008 nationalisation of Crystallex’s gold mine. PDVSA appealed to the US Court of Appeals for the Third Circuit and simultaneously, Crystallex filed an additional suit against PDVSA in Delaware over an alleged fraudulent bond swap, which was scheduled for a hearing on 20 December 2018. Under the settlement, Venezuela has already paid Crystallex USD 500mn in cash and liquid securities and the deal requires Venezuela to post collateral on the remainder of the judgment by 10 January 2019.

This settlement adds to a long list of debt for PDVSA and Venezuela. Since August 2018, Venezuela has been in default on USD 1.25bn in bonds. The country first missed interest payments on those bonds back in February, but August marked the first default on government bond principal. Nonetheless, Venezuela and PDVSA have been careful to pay PDVSA’s USD 2.5 bn 2020 bond because PDVSA has pledged half of its Citgo shares as collateral. Any default could allow bondholders to seize the precious Citgo shares. Thus, at the end of October 2018, PDVSA surprised the 2020 bondholders by making the USD 949mn payment that was due on 27 October 2018, preserving Venezuela’s collateral for the time being. Venezuela and PDVSA have defaulted on all other commitments to bondholders over the past year and are collectively USD 7bn in arrears on their combined traded debt of approximately USD 60bn.

Following Venezuela’s re-election of President Nicholás Maduro, the US Treasury Department's Office of Foreign Assets Control (“OFAC”) increased the financial pressure on Venezuela by banning the US purchase of any debts or accounts receivable owed to the government and PDVSA. Moreover, 14 Latin American countries, including Brazil and Mexico, agreed to increase financial scrutiny of sanctioned members of the Venezuelan government. Subsequently, OFAC instituted additional measures to block Venezuelan government officials from transacting in gold and other efforts to evade US sanctions. OFAC's sanctions on Venezuela prohibit many transactions involving financing or dealings with the Venezuelan government, including the central bank and PDVSA, and also include strict prohibitions on dealings with many senior Venezuelan government officials. Most recently, press reports have hinted that the US may designate Venezuela as a state-sponsor of terrorism, a decision that would likely completely prohibit all financial transactions between the US and the international dollar-based banking system and Venezuela. The US Department of Justice is also actively investigating and enforcing anti-corruption laws involving the Venezuelan government and its allies.

Although Russia gave Venezuela a USD 3.15bn debt-rescheduling “lifeline” last year, Russia claims that Venezuela is not looking for money now, just economic advice. Venezuelan officials have asked for regular consultations and would like a Russian adviser in the government. Venezuela may have asked the Chinese government to provide a consultant, as well.

For economic relief, Venezuela is looking outside the box, as well. It has issued “the Petro,” the cryptocurrency that is backed by the Venezuelan state and designed to be devaluation proof. Senior government officials have stated that Petro sales have already raised USD 3.3bn. The government says its cryptocurrency is backed by an isolated region of the country that holds five billion barrels of oil, although residents are skeptical that the oil exists. The cryptocurrency is similarly difficult to find. Reuters spent four months hunting for the Venezuelan cryptocurrency and found few buyers, none of whom would identify themselves — immediately after Venezuela announced the Petro, OFAC acted to prohibit US persons from any dealings in the currency. Nonetheless, on 21 November 2018, the county’s Ministry of Communication and Information reported that the Constituent National Assembly has approved a bill on cryptocurrency regulation that validates Petro and states that goods and services within Venezuela can be purchased with Petro.


We appreciate the assistance of Pedro Luis Planchart Pocaterra at ARAQUEREYNA with the discussion on Venezuelan law, regulation and practice.


The Bolivarian Republic of Venezuela is a federal republic comprised of 23 states, 2 federal territories, 1 capital district and 11 groups of islands (so called, federal dependencies). The political system is made up of mainly executive, legislative and judicial powers. The country’s most recent constitution, which it ratified by referendum in 1999, added two new governmental branches: (i) the citizen power; and (ii) the electoral power. The constitution calls for an active government that promotes cultural, economic and social rights, in addition to civil and political rights. Venezuela has a civil law system with roots in Roman law. The Tribunal Supremo de Justicia (“Supreme Tribunal of Justice”) heads the Venezuelan judicial system.



  • No banking license is required to lend in Venezuela.
  • Debt trading can occur by way of assignment, but notice must be given to the debtor and the guarantor.
  • Lenders in Venezuela will be subject to Income Tax and Stamp Tax.
  • Persons subject to US sanctions administered by OFAC should carefully scrutinise any dealings in Venezuela to ensure they are complying with prohibitions and restrictions imposed by OFAC.
  • Most dollar-denominated transactions involving a Venezuelan counter-party are likely to face high scrutiny through international financial institutions, many of which will reject such transfers absent extensive diligence.
  • The US Department of Justice has similarly warned that due to the high incidence of corruption in the Venezuelan government, extra caution and diligence is highly advisable for US persons and companies subject to the US Foreign Corrupt Practices Act of 1977 (“FCPA”).



Venezuela does not have eligibility requirements for lenders and does not require lenders to be licenced or authorised to do business in Venezuela. However, the nature of the lender is relevant to determining the applicable income tax regime, because a 34 per cent tax rate on net income of non-bank lenders (absent a tax treaty provision) and a 40 per cent tax rate applies on net income of local financial institutions.



To assign a loan, notice much be given to the debtor and the guarantor, pursuant to Venezuela’s Civil and Commercial Codes. The loan documents may establish additional conditions for transferability.

There are differences between the authorisations required to be a beneficiary of a chattel mortgage and pledge without transfer of possession, depending on the type of lender. No authorisation is required if the lender is a local bank. Authorisation from the Superintendency of the Banking Sector Institutions will be necessary if the lender is a foreign bank and authorisation from the Ministry of Agriculture or the Ministry of Communications may be needed for certain security interests in favour of other types of lenders.



For trusts created in Venezuela, the trustee must be a local bank or insurance company authorised to operate as such.

A security agent can be created, empowering such agent to act on behalf of all the secured lenders. The security agent may serve as payment agent and be authorised to receive payments and to make distributions of such payments among the secured lenders.



Interest payments made to foreign lenders are subject to withholding tax, typically at 4.95 per cent. The borrower is to withhold the tax when making the interest payments. Interest payments to local banks are not subject to withholding tax.

Stamp taxes and fees apply to promissory notes and letters of exchange executed in Venezuela for local lenders and for foreign lenders if payment under the promissory notes and letters of exchange will take place in Venezuela.



Registrations of security interests generate fees that are calculated based on the value assigned to the security interest. Notarisation fees are calculated pursuant to the particulars of the document, not the type or value of the assets.

Venezuelan courts will recognise the foreign governing law of a contract and will enforce such a contract in Venezuela, absent exceptions for national interest contracts and public policy reasons. To recognise and enforce a foreign judgment requires a procedure before the Supreme Court, but does not require an examination of the merits. Venezuela is a party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards so it will recognise and enforce an arbitral award. The process takes one to two years and the enforcement against assets of the defendant in Venezuela may take six months to a year. To enforce collateral security, Venezuelan procedures require a public auction.

Please contact Blair M. Rinne with any queries regarding this month's Trade Alert.
Blair M. Rinne
Associate - Boston



On 25 November 2018, Ireland-based Waypoint Leasing Holdings Ltd., the largest independent global helicopter leasing company, filed a voluntary petition for Chapter 11 of the US Bankruptcy Code, along with certain of its subsidiaries (collectively "Waypoint"), in the US Bankruptcy Court for the Southern District of New York. Waypoint estimates assets and liabilities at USD 1bn to USD 10bn in its filing.

The company expects to move through the restructuring process quickly to facilitate an acquisition. It is stated to have already run a comprehensive sale process and received bids from numerous parties. Established in 2013, Waypoint’s portfolio has more than 160 aircraft for 36 customers in 34 countries and focuses on serving offshore oil drillers. Waypoint’s CEO Hooman Taazhari says the bankruptcy is the “next step” in the company’s bid to restructure its balance sheet. The hearing on Waypoint’s First Day Motions will be held on 6 December 2018.



Voluntary Petition

First Day Declaration

Notice and Agenda for First Day Hearing



Sears Holding Corp. (“Sears”) creditors are labelling any attempt to keep Sears alive as a 'foolhardy gamble'. A court ruling earlier this month held that Sears could sell some of its more profitable stores in the hopes of generating cash. Sears said it could use the bankruptcy process to cut costs and possibly restore itself to possibility. The Creditors Committee felt otherwise, with some describing it as 'wishful thinking'.

However, there was some recent relief for Sears: US Bankruptcy Judge Robert Drain has given Sears a lifeline in the form of USD 2bn debtor-in-possession (“DIP”) financing. The financing includes USD 1.83bn in senior DIP financing and USD 350mn in junior financing. At issue during the hearing was the fact that the junior loan would be secured by previously unencumbered assets owned by Sears entities who were not obligated under the retail giant's pre-petition loans. The budget for wind-down costs went from USD 200mn to USD 240mn. Meanwhile, Reuters is reporting that Sears won court approval for a USD 350mn critical bankruptcy financing which will help it stay afloat during the holiday season in the US. The financing was as a result of a deal between Sears and Cyrus Capital Partner LP and replaced a similar deal earlier in the year between Sears and Great American Capital Partners. Cyrus Capital Partners LP reportedly offered a better deal. The retailer now has a total of USD 650mn in financing. Indeed, just last week Sears debtors filed a motion to sell 13 parcels of real estate to Amerco Real Estate Co. for USD 62mn in order to monetise the debtor’s fee interests. The hearing on the motion will take place on 20 December before Judge Drain, with objections due on 13 December.



Clothing chain New Look Retail Group Limited (“New Look”) is to close up to 120 UK stores, despite an increase in profitability from a loss of GBP 10.4mn last year to a GBP 22.2mn profit this year. The 'wider retail environment' was partly to blame, although a big factor in closing the stores was the high cost of prime ground rent. Meanwhile, the retailer is also struggling to remain liquid. Moody’s recently downgraded New Look’s Corporate Family Rating, citing concerns over ‘inadequate liquidity profile’ and ‘unlikely financial support’ from its owner, Brait SE. The company’s overall unrestricted cash, liquidity and operating facilities totalled GBP 81.8mn as of Q2 2018. This is in stark contrast to the figures at the end of Q2 2017, which totalled GBP 230.5mn. Whether this is enough to keep the remaining UK stores in operation remains to be seen.



Stifel Financial Corp. will reportedly remain in Europe by buying brokerage operations of Germany’s MainFirst Holdings AG. The transaction will ensure that the US firm retains its European presence after Brexit, whilst also adding around 150 employees to its team. The news comes as many overseas lenders struggle to adapt to the uncertainty provided by Brexit negotiations. Eithne O’Leary, president of Stifel’s European unit, described Brexit and the absence of certainty as a ‘fog’. With Britain exiting the EU next March, perhaps these sorts of deals will become more and more common as a way of providing some certainty amidst the Brexit fog.



Steinhoff International Holdings NV's subsidiary, Mattress Firm, has managed to secure USD 525mn funding to support its upkeep. Mattress Firm filed for bankruptcy just last month with a pre-packaged plan for a USD 3.3bn debt restructuring. This is despite the world's largest mattress dealer closing 660 of its 3,230 stores during the bankruptcy. Indeed, it was around this time last year that the accounting scandal that led to Steinhoff's bankruptcy emerged, with some effects still being felt a year later by Pepkor Holdings Ltd in which Steinhoff has a majority stake.



The latest decisions on claims made by investors on the ground of Energy Charter Treaty (“ECT”) violations are encouraging for investors. For more information regarding ECT claims and these recent decisions, click here.  


Please contact Charlotte Ruzzica with any queries regarding the decision or ECT claims.




Brown Rudnick LLP continues to expand in Europe with the appointment of six new attorneys in our Paris office, maintaining its drive to position itself as a leader within the industry.

Joining the firm are two new partners, Pierre-Alain Bouhénic and David Chijner, together with the professionals assisting them, including counsel Arnaud Moussatoff, Marta de Franciscis, and Emmanuelle Naulais, and associate Nicolas Crocq. The new additions join Brown Rudnick's renowned cross-channel restructuring team, which operates from the firm's London and Paris offices. Comprised of experienced restructuring professionals, such as leading practitioner Didier Bruère-Dawson, Brown Rudnick's restructuring team now features more than twenty partners globally.

Read more about the new team here.


Blair M. Rinne

P: +1.617.856.8203

F: +1.617.289.0751

Louisa Watt

P: +44.20.7851.6141

F: +44.20.7851.6100