Venezuela Bondholders Launch New Distressed-Debt Fund

(Bloomberg) -- A group of Venezuela creditors is launching a new fund focused on distressed debt.

The Canaima Global Opportunities Fund, named after a Venezuelan national park, will focus on defaulted, U.S.-sanctioned notes from the South American country, said Celestino Amore, the managing director of IlliquidX, a London-based distressed-debt brokerage firm that will advise the fund.

Amore said they intend to reach out to Venezuelan authorities “immediately” to discuss an accord with bondholders. The fund’s lawyers will determine whether to engage with the government of Nicolas Maduro or Juan Guaido, he said.

“Our aim is to protect our investors’ rights until the current sanction climate improves,” he said. “We’re not doing anything aggressive.”

British law firm RPC was hired as one of the legal advisers of the fund, according to a press release from IlliquidX. RPC declined to comment.

The country has defaulted on some $60 billion of debt from the government and state-run Petroleos de Venezuela since late 2017. U.S. sanctions prohibit American investors from negotiating with many of Maduro’s top finance officials, making a restructuring all but impossible. Additional measures forbid the government from issuing new bonds. Canaima will be based out of Guernsey.

According to some legal experts, a so-called “prescription clause” in Venezuela bonds could let the nation off the hook on unpaid interest to any creditor after three years. The third anniversary for the first missed bond payment coincides with the Oct. 13 deadline for a conditional offer issued by the government last week.

Maduro’s Finance Minister Delcy Rodriguez said the government would waive that clause if creditors agreed not to take further legal action. The deal requires approval from bondholders who own more than 75% of the debt. While Maduro holds a tight grip over the country, U.S. courts recognize Guaido as Venezuela’s president.

Venezuela’s sovereign bonds due in 2027 traded at 8.3 cents on the dollar on Monday, the highest in four months. The government defaulted in those notes on April 2018.

Canaima will also invest in debt from Lebanon, Ecuador, Argentina and Cuba, Amore said.

“The fund will invest in distressed sovereign-debt opportunities, initially starting with Venezuela, but then that would extend to other jurisdictions,” said Luke Allen, who will manage the fund as an independent non-executive director. “The ultimate goal is to safeguard investors’ assets to ensure that they’re treated fairly and to ensure they benefit from the fund’s performance.”

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