On February 11, 2019, the US Treasury Department’s Office of Foreign Assets Control (“OFAC”) amended and issued two general licenses, General License 3C (“GL 3C”) and General License 9B (“GL 9B”), both related to Petróleos de Venezuela, S.A. (“PdVSA”) and entities 50% or more owned by PdVSA (“PdVSA Companies”), and revised three related FAQs, FAQs 650, 661, and 662 to provide updated guidance on GL 3C and GL 9B.
Bonds Issued by Government of Venezuela Entities, Other than the PdVSA Companies: GL 3C
GL 3B was re-issued as GL 3C. GL 3C continues to authorize activities authorized under GL 3B, but (i) extends the deadline to wind down financial contracts or other agreements involving or linked to the bonds specified in the Annex to GL 3C (“GL 3C Bonds”) from 12:01 AM on March 3, 2019 to 12:01 AM on March 11, 2019 and (ii) clarifies that GL 3C only authorizes US persons to purchase or invest in the GL 3C Bonds if such purchases or investments are ordinarily incident and necessary to the divestment or transfer of holding in the GL 3C Bonds.
Securities Issued by the PdVSA Companies: GL 9B
GL 9A was re-issued as GL 9B. GL 9B continues to authorize activities authorized under GL 9A, but extends the deadline to wind down financial contracts or other agreements involving or linked to “PdVSA securities” from 12:01 AM on March 3, 2019 to 12:01 AM on March 11, 2019. Other changes simply clarify and re-order the exceptions of the previous authorizations under GL 9A, but there are no additional substantive changes.
- FAQ 650: The revised FAQ 650 addresses the expected level of due diligence associated with compliance with GL 3C and GL 9B, and the revisions clarify the scope of GL 3C and GL 9B. It also states that GL 3C and GL 9B authorize US persons to facilitate the transfer or divestment of securities or bonds to non-US persons.
- FAQ 661: The revised FAQ 661 provides further examples of transactions authorized under GL 9B and clarifies that US persons may continue to hold their PdVSA securities, but they remain subject to certain restrictions on the sale in secondary markets.
- FAQ 662: The revised FAQ 662 clarifies that US persons may continue to hold their interests in the GL 3C Bonds, but they remain subject to restrictions on the sale of those bonds in secondary markets. Further, to the extent divesting or transferring holdings in the GL 3C Bonds from US persons to non-US persons requires engaging in certain GL 3C Bonds transactions, such as purchasing or settling purchases of the GL 3C bonds, US persons are authorized to engage in such transactions. Otherwise, GL 3C does not authorize US persons to purchase or acquire new interests in the GL 3C Bonds.