US Appeals Court Upholds Venezuela Oil Bonds

VENEZUELA · MARKETS

A US appeals court has upheld Venezuela’s 2020 oil bonds, Venezuelan media report. Citgo, the US refiner whose shares secure them, is directly affected.

A US appeals court in New York has upheld the validity of bonds that Venezuela’s state oil company PDVSA issued in 2016. Venezuelan media reported the ruling on Tuesday, 27 October.

The Second Circuit Court of Appeals rejected an appeal by three PDVSA units and left a September 2025 ruling in place. It matters to bondholders and to Citgo, the US refiner whose shares secure the debt.

What the Court Decided on the PDVSA 2020 Bonds

The Second Circuit, which sits in Manhattan, denied the appeal on Tuesday, 27 October 2026. Lawyer José Ignacio Hernández, who follows the case, posted its first page, saying it denied the appeal and was “ratifying its validity”.

The ruling leaves standing a decision by Judge Katherine Polk Failla, a federal trial judge in New York, dated 18 September 2025. She held that the 2020 bonds and their security documents “were and are valid” under Venezuelan law.

Her reasoning was that Venezuela’s constitution requires National Assembly approval only for contracts the Republic itself signs. PDVSA, a state company, signed these, so no legislative vote was needed.

The trial case, number 19-cv-10023 in New York’s Southern District, pits three PDVSA units against MUFG Union Bank and GLAS Americas. The opposition-appointed ad hoc board of PDVSA ran those units’ case; the two banks are the bonds’ trustee and collateral agent.

How the Bonds Became a Court Fight

In 2016 PDVSA offered a swap of its bonds due 2017 into new 8.5% bonds due 2020, issued on 28 October 2016. About 39% of the US$9.15 billion of old bonds was tendered, the 2025 court opinion records.

The National Assembly, then controlled by the opposition, had not approved the swap. In February 2019 opposition leader Juan Guaidó named a new ad hoc board for PDVSA, which later argued the bonds were void.

PDVSA defaulted on the bonds on 27 October 2019, the 2025 opinion records. The bonds have stayed in default since then.

The Second Circuit vacated an earlier judgment for the bondholders on 3 July 2024, its own published opinion shows. That judgment, about US$1.68 billion, fell after New York’s top court held on 20 February 2024 that Venezuelan law governs.

Why Citgo Is at the Centre

The bonds are secured by a pledge of 50.1% of Citgo Holding, the parent of Citgo Petroleum, PDVSA’s US refining company. Without the pledge, they would be unsecured claims on a defaulted issuer.

Hernández wrote that the lawsuit had in practice suspended the Citgo collateral since 2019. He added that the pressure on Citgo is now greater.

The ruling does not let bondholders act on the shares at once, because US sanctions still limit deals in them. OFAC’s General License 5Z, issued on Wednesday, 16 September 2026, authorises transactions on the bonds only from Thursday, 5 November 2026.

It replaced General License 5Y of 3 August 2026, which had set 17 September, so the date slipped about seven weeks. A separate Delaware court process is selling Citgo’s parent, PDV Holding, to settle creditor claims.

A federal judge there approved a US$5.9 billion offer from Amber Energy on 25 November 2025, press reports show. Amber is an affiliate of Elliott Investment Management, a US hedge fund, and the sale has not closed.

What It Means for US Readers

Investors who hold the defaulted 2020 bonds have a stronger legal position, because their claim and its Citgo security survived the appeal. The practical gain depends on OFAC, which controls whether anyone can act on the collateral.

Citgo’s owners, creditors and buyers now face a clearer legal picture. No change to its refineries or fuel sales is reported, and deals in Citgo shares stay restricted until at least 5 November.

Background is in earlier reports on Venezuela’s US$170 billion debt restructuring and the risk of a rushed debt deal. The guides to who runs Venezuela’s economy, who holds power and the Venezuela news hub add context.

What Is Not Known

The appeals ruling itself could not be opened, so its docket number, panel and type are unconfirmed. The 27 October date rests on Hernández and two Venezuelan outlets.

It is not known whether the PDVSA units will seek a rehearing or ask the US Supreme Court to step in. The sources do not say what OFAC will do before 5 November.

The US$2.86 billion judgment of 17 October 2025 comes from press reports and was not checked at the court. Whether the appeals ruling also covers that judgment is not known.

What Comes Next

The next fixed date is Thursday, 5 November 2026, when OFAC’s General License 5Z lets transactions on the bonds begin. The Delaware sale of Citgo’s parent must still clear US regulators and any court challenges.

The ruling does not mean Citgo shares can be seized now. It removes one legal doubt over the bonds, not the sanctions rules around them.

Frequently Asked Questions

What did the US appeals court decide about PDVSA’s 2020 bonds?

The Second Circuit upheld the bonds’ validity on Tuesday, 27 October 2026, Venezuelan media and a lawyer report. It left a September 2025 trial ruling in place.

What are the PDVSA 2020 bonds?

They are 8.5% bonds that PDVSA, Venezuela‘s state oil company, issued in October 2016 in a swap for bonds due 2017. They have been in default since October 2019.

Why does Citgo matter in this case?

Citgo Holding’s shares, a 50.1% stake, secure the bonds. Citgo Petroleum is PDVSA’s US refining company, so bondholders could target it if sanctions allow.

Can bondholders take Citgo now?

No, because US sanctions still restrict deals in the shares before then. OFAC’s General License 5Z authorises transactions on the bonds only from 5 November 2026.

Why did the opposition-appointed board say the bonds were invalid?

It argued the National Assembly never approved them, which it said Venezuela’s constitution required. The trial judge ruled that approval is needed only for contracts the Republic itself signs.

Sources: US District Court, Southern District of New York, opinion of 18 September 2025, case 19-cv-10023 (copy); US Court of Appeals for the Second Circuit, decisions page (ruling text not opened); US Treasury OFAC, General License 5Z, 16 September 2026; US Treasury OFAC, General License 5Y, 3 August 2026; US Court of Appeals for the Second Circuit, opinion of 3 July 2024, dockets 20-3858 and 20-4127; Venezuelan press report, 27 October; Venezuelan press report, 27 October; Venezuelan press report, October; Venezuelan press report trade-press report on the Delaware approval of 25 November 2025 (all accessed 28 October 2026).