Here's What Could Happen to Venezuela's Messy $170 Billion of Debt

The podcast explores the complexities of restructuring Venezuela's massive debt, estimated between $150 and $170 billion, in the context of political illegitimacy and international sanctions. Lee Buchheit, a sovereign debt restructuring expert, explains the challenges posed by a diverse creditor group beyond bondholders, including trade creditors and holders of arbitration awards. The discussion covers the applicability of the "odious debt" doctrine, where debts incurred by dictatorial regimes may be deemed unpayable, and contrasts the Venezuelan situation with the Iraq debt restructuring. Buchheit suggests that any restructuring will likely involve oil-linked instruments to provide value recovery for bondholders, given Venezuela's reliance on oil exports, and anticipates the U.S. Treasury's involvement in encouraging consensual negotiations.