Red Tree Invs., LLC v. De Venezuela

Red Tree Invs., LLC v. De Venezuela

Opinion

OPINION AND ORDER

CASTEL, U.S.D.J.

These two actions seek to recover monies alleged to be due and owing to plaintiff Red Tree [*2]  Investments, LLC ("Red Tree") by Petróleos de Venezuela, S.A. ("PDVSA") under the terms of two note agreements and notes issued thereunder and a credit agreement. Red Tree sues PDVSA Petróleo, S.A ("Petróleo") as the guarantor of PDVSA's payment obligations. PDVSA and Petróleo are instrumentalities of the Venezuelan government. Red Tree has moved for summary judgment against both defendants in both actions. The principal basis for opposing summary judgment is that sanctions on Venezuelan-related activities and persons coupled with the risk-adversity of the banking community rendered it impossible or highly impracticable for PDVSA to pay what it owed.

For reasons that will be explained, the Court concludes that PDVSA is in default on lawful obligations owed to Red Tree and, accepting the facts in a light most favorable to PDVSA, it has failed to come forward with facts if believed that would entitle them to judgment. Petróleo has failed to come forward with facts, if believed, that would amount to a defense under the guaranty. Red Tree's motions will be granted.

BACKGROUND

General Electric Capital Corporation ("GECC") was the initial noteholder—or lender—under a 2015 Note Agreement with [*3]  defendants, and GE Capital EFS Financing Inc. ("GECEFSF") was the initial noteholder under the 2016 Note Agreement with defendants (collectively, "GECC" and "GECEFSF" are referred to as the "GE Entities"). PDVSA was the issuer and Petróleo was the guarantor under notes issued pursuant to the two agreements. The original principal balance under the three notes issued pursuant to the 2015 Note Agreement and 2016 Note Agreement was approximately $450 million. On January 25, 2019 the notes were assigned to Red Tree. The total amount owed to Red Tree under the three notes is approximately $63.5 million plus unpaid interest.

GECEFSF, as lender, also entered into a Credit Agreement with PDVSA as borrower, and Petróleo, as guarantor (the "2016 Credit Agreement") in which GECEFSF agreed to extend loans to PDVSA in an aggregate principal amount not to exceed $96.9 million. The rights under the Credit agreement were assigned to Red Tree on January 25, 2019. Red Tree claims to be owed $65 million in principal plus interest under the Credit Agreement.

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