A group of creditors has demanded payment on a US$ 1.5 billion Venezuelan bond that is in default, their lawyer said on Monday, kicking off a long-awaited showdown between creditors and the crisis-wracked OPEC nation. President Nicolas Maduro’s government and state-owned companies owe nearly US$ 8 billion in unpaid interest and principal following this year’s default on bonds amid a hyperinflationary collapse of the country’s once-wealthy socialist economy.
Five investment funds have demanded that Venezuela pay the principal and outstanding interest on its 2034 bond, said Mark Stancil of Washington-based law firm Robbins Russell, who represents the group. It is the first step in a potential legal campaign by creditors to recover their investments.
The decision could trigger similar efforts by investors holding US$ 60 billion in outstanding bonds issued by Venezuela and state oil company. That could pave the way for a creditor dispute similar to the one that roiled Argentina for a decade.
“Unfortunately, the Republic has stopped paying on these bonds and is in default,” Stancil wrote in an email. “My clients have therefore exercised their contractual rights to protect their interests - and those of their investors, in the face of the Republic’s failure to meet its obligations.”
The investors hold bonds with a face value of around US$ 380 million, he said, without identifying the funds. Venezuela has failed to make about US$ 140 million in interest payments on the bond, according to Refinitiv data.
The move, known as “acceleration,” means the bond in question must be paid immediately, but in practice it is unlikely that Venezuela would do so and could require years of litigation before investors recoup their money.
The group has not yet taken their claim to courts in New York which govern the terms of the dispute related the bond in question, according to Stancil. He said the group filed the acceleration request to Bank of New York Mellon Corp.