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OFAC updates Venezuela General License 5, and amends an FAQ

Today, OFAC amended Venezuela General License 5 (new version is C), which relates to the PdVSA 2020 8.5% bond, and issued the following amended Frequently Asked Question (FAQ):

595. What does Venezuela-related General License 5C  authorize?

 
The President issued Executive Order (E.O.) 13835 on May 21, 2018.  Subsection 1(a)(iii) of E.O. 13835 prohibits U.S. persons from engaging in transactions related to the sale, transfer, assignment, or pledging as collateral by the Government of Venezuela (GOV) of any equity interest in an entity owned 50 percent or more by the GOV.  One effect of subsection 1(a)(iii) is to require authorization before U.S. persons may engage in certain transactions regarding any equity interest in an entity owned 50 percent or more by the GOV.  Subsequent to the issuance of E.O. 13835, OFAC received inquiries about how and whether subsection 1(a)(iii) of E.O. 13835 could affect the ability to enforce bondholder rights to the CITGO shares serving as collateral for the Petróleos de Venezuela, S.A. (PdVSA) 2020 8.5 percent bond.  OFAC issued General License 5 on July 19, 2018, which removed E.O. 13835 as an obstacle to holders of the PdVSA 2020 8.5 percent bond gaining access to their collateral. 
 
General License 5 was replaced and superseded on October 24, 2019, and most recently by General License 5C, with a delay in effectiveness until July 22, 2020.  Between October 24, 2019 and July 22, 2020 (the date the authorization in General License 5C becomes effective), there is no authorization in effect that licenses against subsection 1(a)(iii) of E.O. 13835 applicable to the holders of the PdVSA 2020 8.5 percent bond.  As a result, during such period, transactions related to the sale or transfer of CITGO shares in connection with the PdVSA 2020 8.5 percent bond are prohibited, unless specifically authorized by OFAC.
 
To 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.  OFAC would encourage parties to apply for a specific license and would have a favorable licensing policy toward such an agreement.  [04-10-2020]

So, basically, you can’t get transactions related to these bonds now until late July – had it expired, they would have been licensable in a short order of time.

Links:

OFAC Notice

General License 5C

Amended FAQ

Categories: Frequently Asked Questions (FAQ) Guidance Licenses OFAC Updates Venezuela sanctions

eric9to5

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