The Daily Journal.- The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) extended through November 5 the protection that prevents holders of Petróleos de Venezuela (PDVSA) 2020 bonds from seizing, without specific authorization, the Citgo shares that serve as collateral for the debt.
OFAC adopted the measure through General License 5Z, which it issued on September 16 to replace General License 5Y. The new license once again postpones the effective date of an authorization that would allow certain transactions involving the PDVSA 2020 bond.
OFAC established that, beginning November 5, 2026, parties may conduct “all transactions related to, the provision of financing for, and other dealings in the Petróleos de Venezuela, S.A. 8.5 percent bond due 2020” that Executive Order 13835 would otherwise prohibit.
In practice, the postponement prevents bondholders during this period from seizing or transferring the Citgo shares that secure the debt unless they obtain specific OFAC authorization. The agency states that, until the new authorization takes effect, it prohibits “transactions related to the sale or transfer of CITGO shares in connection with the bond” unless OFAC specifically authorizes them.
The protection matters because Citgo faces court proceedings to sell assets to satisfy claims from Venezuela’s creditors.
Reuters reported this week that a U.S. court-ordered sale to an affiliate of Elliott Investment Management still requires final approval from the U.S. Treasury Department.
New extension
The decision marks another extension of Washington’s protection of the Citgo shares that serve as collateral for the bond. OFAC explained that it originally issued General License 5 in July 2018 to remove restrictions stemming from Executive Order 13835 that could prevent bondholders from accessing their collateral. Since October 2019, OFAC has repeatedly postponed the authorization’s effective date.
The previous General License 5Y, which OFAC issued on August 3, had moved the effective date to September 17. With the new General License 5Z, OFAC has once again postponed that date, this time until November 5.
The agency also clarified that the license “does not authorize any transaction or activity otherwise prohibited” under U.S. sanctions regulations against Venezuela or other provisions of Chapter V of the Code of Federal Regulations.
OFAC also leaves open the possibility of debt restructuring. According to its updated guidance, if the parties agree to “restructure or refinance payments” related to the PDVSA 2020 bond, additional licensing requirements may apply. The agency says it would encourage the parties to apply for a specific license covering such agreements.
A stake in Citgo Holding backs the PDVSA 2020 bond, which carries an 8.5% coupon. OFAC has expressly recognized the Citgo shares as the collateral against which bondholders seek to enforce their rights.
