Summary

NATURE OF THE ACTION

1. This is an action for declaratory and injunctive relief. Plaintiffs seek a judgment declaring that certain notes issued by PDVSA, purportedly guaranteed by PDVSA Petróleo, and purportedly secured by a pledge of collateral from PDV Holding (as defined more fully below, the "2020 Notes"), as well as the related indenture and pledge agreement, are invalid, illegal, null and void ab initio, and thus unenforceable. Plaintiffs also seek an injunction permanently enjoining any exercise of purported rights, remedies, or privileges with respect to the 2020 Notes or the purportedly pledged collateral-50.1% of PDV Holding's shares of CITGO Holdings, Inc. (the "CITGO Shares"), which owns 100% of CITGO Petroleum Company ("CITGO"), a major, U.S.-based oil refiner.

2. PDVSA is a state-owned enterprise of the Bolivarian Republic of Venezuela ("Venezuela") which manages and oversees all of Venezuela's oil and gas operations. PDVSA Petróleo and PDV Holding are wholly-owned subsidiaries of PDVSA. PDV Holding, in turn, owns CITGO. The oil industry has long been the primary driver of Venezuela's economy, which has completely collapsed due to the disastrous policies of Hugo Chavez and Nicolas Maduro, leading to a humanitarian crisis of epic proportions. CITGO is critically important to any economic recovery and alleviation of human suffering in Venezuela.

3. When the 2020 Notes were issued in 2016, PDVSA was controlled by Maduro, the Chavez protégé who became president of Venezuela after Chavez's death in 2013. After a rigged election in 2018 in which Maduro illegitimately claimed victory, Venezuela's democratically elected National Assembly declared the presidency vacant and, in accordance with the Venezuelan Constitution, the president of the National Assembly, Juan Guaidó, became the country's interim president. Guaidó has since been recognized by the U.S. and over fifty other nations as the rightful President of Venezuela.

4. For more than a decade, the Chavez regime squandered much of Venezuela's oil revenues on political patronage and other wasteful endeavors while underinvesting in PDVSA's domestic production and refining capacities. When chronic mismanagement and neglect met with falling oil prices in 2014, oil revenues plummeted. But the Maduro regime continued to pursue the policies that led to PDVSA's financial undoing, including continued prioritization of debt service over critical investments and operational expenditures, and issuance of unsustainably expensive debt. This odious borrowing included the issuance by PDVSA of certain unsecured notes due in 2017 (as described more fully below, the "2017 Notes").

5. By mid-2016, it was becoming clear that PDVSA did not have the money to repay the 2017 Notes, and a default would have spelled political disaster for Maduro. To stave off default, the Maduro regime unilaterally and illegally orchestrated an exchange offer by which PDVSA exchanged the 2017 Notes - which were unsecured and issued in local currency - for the 2020 Notes, which were issued in U.S. dollars (as described more fully below, the "Exchange Offer"). While PDV Holding is not a party to the indenture governing the 2020 Notes and has no obligation to repay them, PDV Holding's principal asset - the CITGO Shares - were purportedly pledged to secure PDVSA's debt.

6. The holders who accepted this proposal provided the Maduro regime with a financial and political lifeline. Worse yet, these holders did so knowing that the Exchange Offer was initiated without the required authorization of the National Assembly. In fact, when the transaction was announced, the National Assembly declared it illegal and called for an immediate investigation - an investigation that was promptly quashed by the Maduro-controlled Constitutional Chamber of the Supreme Tribunal of Venezuela (the "Venezuelan Supreme Tribunal").

7. Under the Venezuelan Constitution, the 2020 Notes, the indenture pursuant to which the notes were issued (as described more fully below, the "Indenture"), and the pledge and security agreement pursuant to which the notes were purportedly secured (as described more fully below, the "Pledge Agreement") are contracts in the national public interest and therefore required authorization by the National Assembly. Because they were not authorized by the National Assembly, they are invalid, illegal, null and void ab initio under applicable Venezuelan law. As set forth below, the lack of National Assembly authorization was widely reported at the time of the Exchange Offer.

8. PDVSA is now governed by an ad-hoc administrative board (the "Ad-Hoc Board") appointed pursuant to a decree of Interim President Guaidó and recognized by the U.S. government and U.S. courts as the only legitimate corporate body with authority to govern its affairs. The Ad-Hoc Board has, in turn, appointed new boards of its subsidiaries, including PDV Holding. On account of the illegal Exchange Offer orchestrated by the Maduro regime, PDV Holding is now facing the loss of its controlling interest in CITGO.

9. On October 28, 2019, PDVSA did not make a $913 million principal and interest payment purportedly due on the 2020 Notes, triggering an Event of Default. Last week, in anticipation of this possibility, the U.S. issued General License 5A, forbidding Defendants from exercising default remedies until January 22, 2020. Unless this Court grants the relief sought in this action by that time, CITGO will be lost and the Guaidó government's efforts to restore democracy and the rule of law, rebuild Venezuela's economy, and ameliorate the country's ongoing humanitarian crisis will suffer a devastating blow. Accordingly, Plaintiffs seek declaratory and injunctive relief to avoid this cascade of irreparable harms.

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