1. Adoption of Collective Action Clauses by Venezuela
Venezuela started including collective action clauses (CACs) in its international bonds issued under New York law in 2003. Currently, Venezuelan international bonds that include CACs represent an aggregate principal amount of approximately U.S.$ 4.17 billion out of a total principal of foreign external indebtedness of approximately U.S.$ 24 billion (excluding foreign external indebtedness of Venezuelan quasi-sovereigns such as PetrÛleos de Venezuela, S.A.1). It now seems that CACs have become a standard feature in Venezuela's international debt securities issued under New York law.
Venezuela joins Mexico, Brazil, Uruguay and other Latin-American sovereigns that had previously included CACs in their global bonds issued under New York law. However, Venezuela and Brazil are the only sovereigns whose CACs require an 85% approval threshold, as opposed to Mexico óand the majority of the other sovereigns that have included CACsó whose CACs have a 75% approval threshold.2
Set forth below is a chart that identifies the Venezuelan international bonds that currently contain CACs.
Aggregate principal amount
September 16, 2003
November 26, 2003
October 22, 2003
January 7, 2004
April 21, 2004
LIBOR + 1%4
Description of the Venezuelan CACs
The "standard" CAC included in Venezuela's international bonds issued under New York law from September 2003 includes an 85% approval threshold to amend the payment terms of the bonds as well as some non-payment terms that are very important to noteholders.
More specifically, 85% in aggregate principal amount of each series of "outstanding"5 notes is necessary to:
change the due date for the repayment of the principal,
reduce the principal amount of the notes, or the portion of such principal amount that is payable upon acceleration of the maturity of notes,
permit early redemption of the notes,
change the interest rate on the notes or any premium payable upon their redemption,
change the currency in which interest, premiums and principal of the notes are payable or the required place or places at which payment of interest, premium or principal of the notes is payable,
shorten the period during which Venezuela...