Venezuelans use the expression “pissing out of the pot” to point out when a conclusion does not follow from the facts. An argument based on the wrong facts cannot withstand scrutiny. The main argument in the Argus article is…

    “Guaido's representatives argue that a New York federal court should invalidate the bond because it      was never approved by the National Assembly in Caracas.

The argument has gained no traction, partly because it would set a precedent for other foreign issuers to walk away from their US obligations based on political changes at home, debt experts say. “

First, the Guido government is not arguing that the 2020 bond issuance is illegal because the National Assembly (NA) did not approve it. What it is arguing is that the pledging of 50.1% of CITGO was illegal because PDVSA had no authority to pledge CITGO’s shares without the NA's consent. In fact, the Venezuelan Constitution (Art. 312) authorizes PDVSA as a 100%-owned government enterprise to issued debt without expressed AN approval; except when the financing contract involves national interests (Art. 150).

PDVSA has indeed entered into many financing contracts which were no approved by the NA. However, none of these pledged any PDVSA assets, let alone an asset as important as CITGO, which once represented over 30% of the country’s oil revenue, while oil revenues represented 96% of Venezuela’s GDP. As such, the pledging of CITGO as collateral was indeed a contract that involved the national interest.

Two other important facts missing in the Argus argument are, first, that Art. 150 has been in the Venezuelan Constitution since the 19th century and that its amendment in 2007, following a referendum pushed by Chavez to cement its socialist government, carried over this article. Hence, Argus’ argument that enforcing Art. 150 “would set a precedent for other foreign issuers to walk away from their US obligations based on political changes at home” is hubris.

A second missing fact in the Argus article is that when the Maduro government was negotiating the 2020 bonds contract, the NA made it clear to Maduro and the international investors that the contract needed the AN’s approval and that without it the contract would be illegal. The international investors nonetheless decided to do the bond swap (the 2020 bonds were issued to replace bonds with an impending maturity, which PDVSA could not afford to pay). The international investors decided to take a calculated risk to roll over the debt, hoping for better days ahead for PDVSA, instead of the impending default on the maturing bonds that they knew would soon be worth pennies on a dollar in a debt restructuring process.

Based on the law and the facts, the SDNY court decision in the upcoming trial would need to confirm the validity of the 2020 bond issuance, while setting aside its CITGO collateral as legally invalid. As a result, the 2020 bonds will become part of the $150 billion heap of Venezuela’s PDVSA and sovereign debt. If the SDNY court “pisses out of the pot”, the case will be appealed to the Second District Court of appeals and all the way to the Supreme Court, if necessary.

If the 2020 bondolders' legal counsel are making money the old fashion way (earning it), they should be recomending their clients to drop the case before it is too late.

Contrary to what the Argus article asserts, Crystallex’s claim on CITGO’s shares is much more solid than the 2020 bondholders’ claim. KRY has a judgement in hand that even the Supreme Court has refused to upset, and the Justice Dept. has conceded the judgement is valid an executable (although the DOJ would prefer it not to be executed now).