Bloomberg) --
Creditors holding defaulted debt issued by Venezuela and its state-run oil company are calling on the Trump administration to roll back a ban on secondary trading of the notes.
The group advised by Cleary Gottlieb Steen & Hamilton and Guggenheim Securities is making the case that sanctions introduced this year that limit transactions cause harm to U.S. investment firms and their clients, according to three people familiar with the matter, who asked not to be identified discussing private conversations. Meanwhile, the measures do little to prevent bad actorsclose to Nicolas Maduro’s regime from trading the debt, the people said. The group includes T. Rowe Price Group Inc. and Fidelity Investments.
Cleary Gottlieb, Guggenheim and the Treasury Department didn’t respond to requests for comment.
Last week, the creditor group held a conference call aimed at recruiting new members among both brokers and money managers. Lawyers in the committee said they plan to request a meeting with officials at the Treasury Department, State Department and National Security Council this month, the people said.
The group’s concern is that JPMorgan Chase & Co. may remove Venezuelan debt from its benchmark indexes in late June, forcing some U.S. holders to sell at steep discounts because the only potential buyers are offshore firms. They argue that by compelling mutual funds, exchange-traded funds and other traditional investors to unload the debt, it will wind up in the hands of foreign hedge funds that are more aggressive and more likely to be litigious in bond restructurings, delaying the chances for an economic recovery to take hold.
Trading of Venezuelan debt has all but evaporated since the Trump administration tightened restrictions in January, preventing U.S. firms from purchasing the bonds. Trace, Finra’s bond price reporting system, showed the last trade on state oil giant Petroleos de Venezuela’s notes was almost two weeks ago.
On Sunday, National Assembly President Juan Guaido, recognized as head of state by the U.S. and more than 50 nations, hired former Cleary Gottlieb restructuring lawyer Lee Buchheit as a strategic adviser for his interim government even as Maduro still holds the keys to most institutions in Caracas. While Buchheit has advocated for the use of asset protection orders, the Treasury Department has so far declined to issue such an order.
