US Appeals Court upholds validity of PDVSA 2020 bonds

The U.S. Second Circuit Court of Appeals in Manhattan has confirmed the validity of Petróleos de Venezuela S.A. (PDVSA) bonds due in 2020. The court ruled that prior approval from the Venezuelan National Assembly was not required for the bonds' validity, noting that the Venezuelan Constitution did not nullify the bond offering.

This decision reaffirms a previous ruling by the U.S. District Court for the Southern District of New York. The 2020 bonds are secured by shares of the refinery Citgo Petroleum, which is owned by Venezuela. Bondholders have been seeking compensation following the default.

Legal experts noted that the ruling increases pressure on Citgo, as the collateral linked to the company has been effectively suspended since 2019. Additionally, the U.S. Treasury’s Office of Foreign Assets Control (OFAC) recently authorized transactions related to these bonds, providing a temporary extension of protection for Venezuelan ownership of Citgo.