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As of this writing, a number of OFAC authorizations authorize transactions related to the restructuring of debt of the GoV, including PdVSA. These authorizations differ in scope and overlap to some extent.
• Venezuela GL 3 and Venezuela GL 9
Venezuela GL 3 authorizes “all transactions related to…and other dealings in” covered GoV bonds, and FAQ # 547 says that GL 3 covers “participating in negotiations regarding such bonds,” provided that there is no actual “creation or subsequent dealing in new debt of PdVSA or debt otherwise of the Government of Venezuela”. This makes clear enough that transaction of U.S. person debtholders (and transactions of U.S. person incident to transactions of non-U.S. person debtholders) are covered as it relates to restructuring negotiations, and the logic of FAQ # 547 presumably extends to Venezuela GL 9 (“dealings in any debt…of…[PdVSA]… prior to August 25, 2017.”
These GLs are somewhat ambiguous as to whether U.S. persons can provide services to the GoV side of a restructuring negotiation as a transaction incident to a “dealing in” the covered debt. In any case, there is no prohibition or exclusion on direct dealings with the GoV or PdVSA. These GLs are also ambiguous on the question of whether they cover entry into “contingent contracts” in the context of restructuring (if the “creation” of the new debt is contingent on OFAC approval, there is no obvious reason why these GLs would not cover such contingent contracts). Of note on this question FAQ # 595 says “[t]o the extent an agreement may be reached on proposals to restructure or refinance payments due to the holders of the PdVSA 2020 8.5 percent bond, additional licensing requirements may apply.” This appears to suggest that agreements in principle are authorized (by GL 9), but the execution of such agreements requires specific authorization.
• Venezuela GL 56 and Venezuela GL 52
Venezuela GL 52 authorizes “all transactions prohibited by Executive Order (E.O.) 13884 or E.O. 13850 involving” PdVSA “by an established U.S. entity,” with an exclusion for “transactions prohibited by E.O. 13808”. Venezuela GL 56 authorizes “all transactions prohibited by Executive Order (E.O.) 13884 that are ordinarily incident and necessary to engaging in commercial-related negotiations of contingent contracts with the Government of Venezuela,” with a similar carveout for “transactions prohibited by E.O. 13808”. EO 13808 prohibits dealings in “new debt” of the GoV and PdVSA, but that prohibition does not appear to be implicated by mere negotiations (including the potential entry into contingent agreements), consistent with the discussion above. With the exception of “bonds issued by the Government of Venezuela prior to [August 24, 2017],” dealings in which are prohibited by EO 13808 (but most of which are covered by GL 3), these GLs appear to authorize restructuring negotiations directly with PdVSA, as well the provision of services to debtholders and PdVSA alike in connection with such negotiations (in the case of GL 52, where the services are transactions by an established U.S. entity), but only with respect to the restructuring of debt created prior to August 24, 2017 (because negotiations with respect to debt created on or after that date implicates EO 13808) . For GL 52, direct negotiations with the GoV and services ordinarily incident thereto appear to be authorized, but not necessarily the provision of services to the GOV.
• Venezuela GL 57
Venezuela GL 58, which licenses against all of EO 13808, authorizes “all transactions prohibited by the [VSR] that are ordinarily incident and necessary to the provision of legal, financial advisory, and consulting services to the Government of Venezuela, including…[PdVSA]…in connection with potential restructuring of debt of the Government of Venezuela, including debt of PdVSA and PdVSA Entities.” The GL has a carveout for “[t]he restructuring, transfer, or settlement of debt of the Government of Venezuela, including debt of PdVSA and PdVSA Entities, or direct negotiations between the Government of Venezuela, including PdVSA and PdVSA Entities, and creditors regarding such restructuring, transfer, or settlement…”
GL 57, unlike the other GLs discussed above, appears specifically aimed directly at the provision services to PdVSA and the GoV in connection with potential restructurings. Like the other GLs above, the authorizations here stop short of enabling U.S. person involvement in the actual execution of agreements to restructure (except, possibly, contingent agreements). Notably, there is no restriction in GL 57 for dealings in or related to “new debt,” so negotiations can cover debts issued on or after August 24, 2017, but relative to the other GLs described above there are significant limitations as it relates to the exclusion for “direct” negotiations and the fact that the GL authorizes the provision of services “to the Government of Venezuela,” rather than to bondholders of GoV debt.
• Licensing Gaps?
The GLs described above cover a broad range of negotiation-related activity with respect to a broad range of GoV issued debt, but query whether there may not be authorization for U.S. person provision of services by U.S. persons to debtholders in connection with “new debt” issued by the GoV (other than PdVSA). This does not appear to be authorized by any of the GLs described above, while negotiations with respect to all other debt types (old/new) and parties (GoV debtors/ non-GoV creditors) appear to be covered. It is possible that OFAC could justify the scope of GL 57 by taking the view that the provision of services to non-sanctioned debtholders in connection with GoV debt does not implicate OFAC’s blocking prohibition such that authorization is not required, but this would constitute an uncharacteristically narrow interpretation of the scope of the blocking prohibition (contrast e.g. 570.405 “services performed in the United States or by U.S. persons, wherever located…[w]ith respect to property interests of any person whose property and interests in property are blocked” are generally prohibited.