Napoleon’s invasion of Russia in 1812 was a large undertaking. Restructuring Venezuela’s public sector debt will be a very large undertaking.

Conclusion

Napoleon’s invasion of Russia in 1812 was a large undertaking. Restructuring Venezuela’s public sector debt will be a very large undertaking. Venezuela will not be able to view the prospect of holdout creditors with the same equanimity that Argentina showed in 2005 at the time of that country’s bond restructuring. The mischief that litigating holdout creditors can cause in  Venezuela is considerably greater than Argentina ever faced. The trick will be in finding ways to discourage prospective holdouts from holding out and to defang the legal threat posed by those who persist in declining an offer to restructure. Even if the holdout creditor threat can be defused, there are a number of other thorny issues to be addressed in a restructuring of Venezuela’s public debt. What can be done with the non-debt claims such as the ICSID arbitration awards or blocked Bolivar deposits? What treatment will be given to bonds placed in the market at a very heavy original issue discount or warehoused with a state-owned entity and then purportedly resold in a secondary market transaction at a large discount? What weight, if any, should be given to the assertion that some transactions were undertaken in the absence of local legislative approval? Let us hope that the analogy to Napoleon’s Russian adventure in 1812 will stop at the size of the undertaking and will not extend to its outcome.