A New York federal judge found no reason to rush enforcement of two judgments against Venezuela’s state-owned oil company worth $246 million, citing numerous obstacles still impeding the sale of Petroleos de Venezuela’s U.S. asset Citgo.
U.S. District Judge Peter Kevin Castel entered the money judgments Thursday in two cases involving private debts acquired by the Ohio-based firm Red Tree Investments, worth $157.9 million and $88.4 million each, including interest. In separate orders the same day, Judge Castel denied the firm’s requests to dissolve the automatic 30-day stay on enforcing the judgments.
Red Tree expressed anxiety last year over the line of creditors waiting to snap up PDVSA’s interest in Citgo as soon as it is sold, noting that a Delaware court is already designing the sale in advance of a license from the Office of Foreign Assets Control. According to Red Tree, the firm had already been unfairly prejudiced by a clerical error marking its cases as “terminated.”
In its Dec. 31 letter urging Judge Castel to dissolve the stay of his forthcoming judgment, Red Tree said it was in danger of losing its “only meaningful opportunity to enforce its judgments in the United States.” Because Citgo sales “could potentially launch at any time, Red Tree could be shut out from the Citgo sale if it is prevented from seeking an attachment on the [PDVSA] shares solely because of the automatic stay,” the firm wrote.
On Tuesday, the U.S. State Department issued a press release expressing the United States’ continued support of president-in-exile Juan Guaidó, ending some weeks of uncertainty surrounding the end of his interim term and his declining popularity. For now, sanctions against the Venezuelan government remain in place, and creditors are still prevented from targeting Citgo without an OFAC license.
Public and private creditors suing the struggling nation have been closely monitoring the Delaware case brought by Canadian mining company Crystallex International Corp., the first creditor to obtain an attachment writ for the oil company’s assets as an alter ego of the Venezuelan government.
A handful of Venezuelan exiles appointed by Guaidó as the ‘ad hoc board’ of PDVSA are now tasked with defending the state oil assets in dozens of lawsuits. While sitting President Nicholás Maduro remains in power, only the Guaidó administration can represent Venezuela in U.S. courts, which are required to defer to U.S. foreign policy.
In a letter opposing Red Tree’s stay of judgment request, the ad hoc board reminded Judge Castel that there are still numerous significant hurdles to overcome before the marketing process can launch for Citgo’s sale.
The Crystallex court currently has only a working draft of the sales process order, and PDVSA has filed more than 30 objections that must be resolved before a final order can be entered, according to the letter.
“And, most significantly, as Red Tree’s own letter admits, no sale can take place until the Office of Foreign Asset Control … issues a license permitting the sale — a regulatory process that often takes months, if not years,” the PDVSA board wrote.
Counsel for PDVSA declined to comment Friday. Counsel for Red Tree Investments did not immediately reply to requests for comment.
Red Tree Investments is represented by Steven Francis Molo, Justin M Ellis and Lauren F. Dayton of MoloLamken LLP.
PDVSA is represented by Dennis H. Tracey III, Richard C. Lorenzo, Matthew Alan Ducharme and Robin L. Muir of Hogan Lovells.
The cases are Red Tree Investments LLC v. Petroleos de Venezuela SA et al., case numbers 1:19-cv 02523 and 1:19-cv-2519, in the U.S. District Court for the Southern District of New York.
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