23/8/2018 Debt restructuring battle is brewing over Venezuela | Financial Times

Venezuela
Debt restructuring battle is brewing over Venezuela
Law firms, hedge funds and a secretive Mexican billionaire are jockeying for position

Tareck El Aissami, Venezuela's vice-president, is leading the country's debt talks © Bloomberg

Robin Wigglesworth NOVEMBER 20, 2017

Battle lines are being drawn in what promises to be the most complex government bankruptcy in
history. And in the shadows lurks a secretive Mexican billionaire who might emerge as a pivotal
figure in the upcoming fight.

Distressed countries usually never lack for advice, with bankers and lawyers desperate for the
prestigious, often well-paying jobs of working on government bankruptcies. But Venezuela is an
usual and complicated case.

President Nicolás Maduro earlier this month admitted the country needed to restructure its foreign
debts, and after an inauspicious initial meeting with creditors, the government has begun hiring
advisers to help guide it through what promises to be a messy situation.

People in the industry say one person is emerging as a potentially crucial player in the messy
situation: a mysterious, art-loving Mexican billionaire called David Martinez. Mr Martinez runs a
hedge fund called Fintech Advisory, and has been involved in almost every sovereign debt
restructuring in the past quarter century, according to a rare comment piece he wrote for the
Financial Times in 2013.

People familiar with Mr Martinez’s activities say the Mexican — who once reportedly contemplated
the clergy before turning to high finance — often works closely but surreptitiously with

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governments in stricken countries. They now say he is getting involved in Venezuela, albeit in an
unclear role.

“He’s trying to coach these guys through it, while defending his own interests,” says a person
familiar with the billionaire.

Mr Martinez had close ties to Néstor and Cristina Kirchner, the former presidents of Argentina
during the country’s 2005 debt restructuring.

“He likes to act as an informal adviser in these situations,” says another person familiar with Mr
Martinez’s tactics. Mr Martinez did not respond to requests for comment.

Another important operator is Arnold & Porter, a distinguished US law firm, which is advising the
government. Meanwhile, PDVSA, the Venezuelan state oil company, is working with Hogan
Lovells, an Anglo-American firm. Both have long-term relationships with their clients. Venezuela
has also appointed David Syed of Dentons, another big law firm. At face value, this looks like an
able, experienced team. But the reality is more complex.

Venezuela, PDVSA and many officials in the country — including vice-president Tareck El Aissami,
who is leading the debt talks — have been sanctioned by the US Treasury’s Office of Foreign Assets
Control (Ofac). That precludes Americans from working with them, prompting some law firms and
banks to refuse to work with the regime.

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Against that backdrop, Mr Syed abruptly left his former firm Orrick and moved to Dentons last
weekend, after the former refused to take on Venezuela as a client. Dentons, Arnold & Porter and
Hogan Lovells declined to comment, while Orrick said: “David Syed has resigned as a partner in
our firm for reasons related to client interests.”

According to the biography on Orrick’s website, since deleted, Mr Syed has seemingly never
worked on a sovereign debt restructuring. Indeed, lawyers in the field say they can never recall
hearing his name until last week.

But he has seemingly won the confidence of the Venezuelan government and looks set to become
an important figure in the looming restructuring talks, especially with doubts over whether Arnold
& Porter and Hogan Lovells will get the Ofac exemptions they need to continue to work with
Venezuela. As a non-American working from London, Mr Syed might not need one, even though
the work is fraught with legal and reputational risks.

Any Venezuelan debt restructuring is going to be a Herculean task, given US sanctions, the
government’s refusal to seek help from the International Monetary Fund and a messy $150bn debt
pile issued by different entities and with varied legal clauses. That will complicate a holistic
restructuring approach, and could lead to creditors splintering into different groups.

In Venezuela, hedge funds involved in distressed debt — sometimes dubbed “vultures” — are
circling.

Greylock Capital, a US hedge fund, is helping organise a bondholder group, and creditors have held
talks with the Washington-based Institute of International Finance, which played a major role in

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co-ordinating Greece’s creditors in its €200bn restructuring.

This grouping is said to have held talks with William Rhodes, a retired banker who enjoyed a five-
decade career at Citigroup and was involved in the sovereign debt crises of Latin America and Asia
in the 1980s and 1990s. Investors say Richard Cooper of Cleary Gottlieb and Mark Walker of
Millstein are pitching to advise creditors.

But a rival group is forming in London, under the aegis of Macrosynergy Partners, an emerging
markets-focused hedge fund set up by three former BlueCrest fund managers, according to people
familiar with the matter. People close to the nascent debt talks say more groups could form.

“We’re all just trying to find out what’s happening,” says Hans Humes, head of Greylock. “But
we’ve started to organise bondholders. We have to speak with one voice on this.”

Copyright The Financial Times Limited 2018. All rights reserved.

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