Investors Sift Through Venezuela Debt Black Box as Some Bondholders See Path for Restructuring in the Short Term; 9.25% 2027 Notes at 43

Reporting: Maria Abreu, Magnus Scherman, Simon Schatzberg

Relevant Document:
2015 National Assembly Report (in Spanish)

Venezuela’s sovereign bonds are holding steady with the $4 billion 9.25% 2027 at 43 cents today, having bounced around 10 points since U.S. forces captured President Nicolas Maduro on Jan. 3, sources told Octus. Bonds issued by state oil company PDVSA have also climbed significantly since last week, with its $3 billion 11.75% bond due 2026 quoted at 32 today, according to Solve.

Sources told Octus they expect meaningful policy changes in Caracas in the short term amid heavy U.S. pressure, which could lay the groundwork for Venezuela to commence an economic recovery process, including a restructuring of its sovereign debt and outstanding trade claims.

Canaima Capital, a Venezuela-focused fund, told Bloomberg on Jan. 5 that a debt restructuring could take place as early as this year. Canaima founder Celestino Amore hinted that a workout could involve limited haircuts and a value recovery instrument to align payout to creditors with Venezuela’s economic bounceback.

The Venezuela Creditors Committee, a bondholder group that has been in place for several years, held a meeting on Jan. 5, but is not commenting on the situation, sources close told Octus. The group engaged Orrick as legal advisor in 2024. In a 2019 Financial Times piece, Orrick counsel Thomas Laryea said Venezuela’s distressed situation would most likely require an innovative approach.

Suriname issued an oil-linked value recovery instrument, or VRI, in its 2023 debt restructuring. Ethiopia and Zambia also used VRIs to land agreements with their bondholders.

Exploring Venezuela’s Debt Black Hole

A significant challenge to restructuring Venezuela’s debt is a high degree of uncertainty around the quantum of outstanding debt and trade claims.

Indentures for bonds issued by Venezuela and PDVSA can be found HERE. A maturity schedule is below:

The outstanding principal on eurobonds issued by Venezuela and its state-owned companies totals around $58 billion, comprising about $31 billion in bonds issued by the republic, $27 billion in PDVSA bonds and $650 million in bonds issued by state electricity company Elecar. The bonds have accrued interest of at least $31 billion since defaulting in 2017, bringing the total liabilities under the bonds to around $90 billion as of the end of 2023, according to a report published last year by the Venezuela chapter of Transparency International.

Official data on Venezuela’s public foreign currency liabilities is characterized by significant delays, fragmentation and opacity, complicating any comprehensive assessment of the country’s fiscal and external position. Since 2015, the publication of key macroeconomic and financial indicators by institutions such as the Central Bank of Venezuela, the Ministry of Finance and PDVSA has been substantially reduced or discontinued.

This disruption in data availability coincided with structural features of the debt accumulation process that further limited transparency, including the use of off-budget mechanisms, exchange rate distortions and financing instruments that were not subject to effective parliamentary oversight, according to a report by the opposition-controlled 2015 National Assembly. As a result, analysts and policymakers have lacked a unified framework to evaluate the scale, composition and sustainability of Venezuela’s foreign currency liabilities.

A report published in 2019 by the 2015 National Assembly’s Finance Committee and Subcommittee on Credit and Public Debt, aggregates the evolution of public sector foreign currency obligations over the past two decades. The National Assembly’s assessment places Venezuela’s total foreign currency liabilities at $158.4 billion at the end of 2018, representing an increase of nearly 480% relative to 1999.

This assessment is the most recent governmental attempt to quantify the country’s debt obligations, using a combination of official publications, international institutional data and independent estimates. As stated in the report, it is “a diagnostic assessment of the amount of these obligations and not a document acknowledging the total stock of the public sector’s foreign currency liabilities.”

Source: 2015 National Assembly

The analysis shows that public sector foreign currency liabilities increased significantly from the end of the 1990s onward. At the close of 1999, these obligations were estimated at $22.586 billion, equivalent to roughly 1.1 times annual exports. Over the following years, debt accumulation accelerated, reaching an estimated peak of $149.296 billion in 2016, or approximately 5.6 times exports.

By the end of 2018, liabilities had declined to about $130.633 billion, reflecting both the loss of access to international capital markets and the amortization of certain bilateral and unconventional financing arrangements. This reduction occurred in parallel with a severe deterioration in external economic conditions and culminated in a generalized default on a significant portion of the republic’s and PDVSA’s obligations beginning in late 2017.

The 2015 National Assembly report structures public sector foreign currency liabilities around the concept of the “Restricted Public Sector,” which comprises the central government and nonfinancial public enterprises, with PDVSA occupying a dominant position. Within the central government, the largest share of foreign currency debt corresponds to bonds issued in international markets between 2006 and 2016.

These issuances were concentrated in a few years, notably 2008, 2011 and 2016, and were originally justified as financing for economic and social development projects. Following the collapse in oil prices in 2014 and the subsequent decline in export revenue and oil production, the government prioritized external debt service through sharp import compression. However, worsening market access and declining cash flows ultimately led to the suspension of payments on sovereign bonds in October 2017.

Beyond Bonds

In addition to bond debt, the central government accumulated bilateral obligations, primarily with the Russian Federation and China, as well as multilateral debt with institutions such as the Andean Development Corp., the World Bank and the Inter-American Development Bank. In several cases, multilateral lending was extended to facilitate the servicing of existing obligations and avoid adverse effects on lenders’ balance sheets. By the end of 2018, bilateral and multilateral debts were estimated at approximately $2.915 billion and $4.98 billion, respectively, as stated in the report.

PDVSA represents the second major pillar of the liability structure. Similar to the sovereign, the oil company’s largest financial obligations stem from bond issuances carried out between 2007 and 2016. These bonds were intended to support investment in the oil sector, though their issuance coincided with declining operational performance. PDVSA ceased servicing most of its bond obligations in late 2017, with the notable exception of the PDVSA 2020 bond, which remained current until 2020 due to its collateralization with a majority stake in Citgo.

Beyond financial debt, PDVSA accumulated substantial nonfinancial liabilities, as stated in the 2015 National Assembly report. These include obligations to joint venture partners arising from withheld dividends, accounts payable to suppliers and contractors and crude oil advances received from Russian oil firm Rosneft. While some of these liabilities declined after 2014, they continued to weigh heavily on the company’s balance sheet. The company has not disclosed how many of those promissory notes were issued.

In parallel, Venezuela’s long-standing financing relationship with China, structured through the China-Venezuela Joint Fund and related mechanisms, resulted in disbursements totaling approximately $54 billion since 2008. Debt service under these arrangements has been conducted largely through oil shipments, and despite refinancings and grace periods, the outstanding balance was estimated at $19.283 billion at the end of 2018. The Hong Kong Branch of China Development Bank reported 11.7 billion Hong Kong dollars ($1.5 billion) in Venezuela loans as of June 30, 2025, of which HKD 8.49 billion had been impaired.

The final component of the liability framework presented in the report relates to compensation awards stemming from nationalizations carried out since 2009. Arbitration cases before the International Centre for Settlement of Investment Disputes have resulted in several rulings against the Venezuelan state, generating additional external obligations. While settlements and repayments have reduced part of this exposure, estimates suggest that several billion dollars in commitments either remained outstanding or were subject to limited disclosure as of 2018.