Note: Below are a few little notes I wrote in the weeks after the capture of Maduro. Perhaps all less in the weeds than my normal shtick (if you want something more in the weeds, Moatti and Muci’s hypothetical framework is still the most cited – and in the members area there are several sell-side notes on Venz and sovereign restructurings more generally that I’ve included). Anyway, in the time since originally posting this in the members area the Venezuela Creditor Committee (referenced below regarding their prior forays against Venz) has tapped HL as an advisor which sounds more substantive than it is since, well, it takes two to tango and to get the ball rolling one of them has to be a legitimate (recognized) counterparty in the eyes of the administration. And while President Trump has described bilateral relations as “a 10” and invited Rodríguez to Washington, Reuters has reported that the administration is also working on a federal indictment of Rodríguez. So, a mixed bag there, I suppose. Through these last two months pricing across Venz / PDVSA debt has been remarkably range-bound as everyone continues to wait for more substantive signals of what’s to come next – as I’ve said from the outset, I wouldn’t wait with bated breath for such signals but with this administration one can never be too sure...

If one’s to dabble in distress, then the line from Lewis Caroll’s The Hunting of the Snark ought to be committed to memory or at least should be printed out in a place that can’t be missed: “They threatened its life with a railway-share”.

The 1840s Railway Mania that Caroll references was marked by speculators falling under the spell of railway shares – for whatever reason, maybe it was the ceaseless upward price action alone, who knows. But it was also probably at least partially because it seemed axiomatic that railways, in some capacity, were the future and that to buy into railways, the specifics of the railways one bought into be damned, was a no-brainer. It was the macro narrative, not the micro specifics, that mattered.

You’d be forgiven for thinking that those drawn to distress – preternaturally pessimistic, dour in disposition – would be immune to all this. And perhaps that’s true generally but with the one caveat that when the siren song of sovereign debt calls out, once or twice a decade, lots of buy side analysts can’t resist getting drawn in.

Which is all sensible enough. Because, look, as much as I’ve harped on the “micro” in the hundreds of thousands of words I’ve written (e.g., the specific language in docs that permit, or not, certain transaction structures) I’ve also at times tried to discuss the importance of the macro backdrop since that is such a determiner of both what opportunity set one looks to and aggregate fund performance across most credit funds (no matter how “opportunistic” one pretends to be).

Because there are only so many idiosyncratic situations out there at any one time (e.g., LMEs that one can participate in). Thus, almost all funds ride the wave of HY spread compression or expansion to various extents and then fight tooth and nail, when idiosyncratic situations arrive, to carve out a high return since it’ll be those situations that are most additive to their overall return in excess of their benchmark (as much as funds might moan that they shouldn’t be compared to any benchmark).

Anyway, this is partly the reason that the siren song of sovereign debt is so hard to ignore: sure, sure, if there were a financial crisis and HY spreads blew out then sovereign debt of dubious value would trade wider all else equal – but, outside that, it’s going to be largely uncorrelated to the HY universe and, as important, is going to be a large enough and (most often) liquid enough pool that trades can be put on at whatever size one wants whenever one wants (within reason).

This latter point is worth underlining since outside of huge, sprawling capital structures (e.g., Altice France) even if one thinks they’ve found a fantastic opportunity one can be limited, either by the amount of debt outstanding or the amount of debt that can be practically acquired, in being able to do the trade in sufficient size to move the needle much for the fund overall.

But, as I’ve said elsewhere, sovereign debt restructurings are a world unto themselves, and if one thinks there are no rules to the road when it comes to LMEs (untrue, although recent rulings have made things murkier) there are legitimately few hard and fast rules when it comes to sovereign restructurings despite the reams of papers, frameworks, initiatives, and associated gobbledygook produced by multilateral institutions (that are adhered to when convenient, disregarded in spirit or outright ignored when not).

Sure, lots of sovereign debt (e.g., VENZ bonds!) are issued under New York state law, and New York courts will hear arguments from cantankerous creditors who believe they’ve been aggrieved. But while these have the look and feel of traditional disputes – and opinions can be rendered that have the same superficial look and feel as we’ve come accustomed to – the remedies are, well, sometimes vague and difficult to enforce against an uncooperative or ill-defined sovereign (at least until Elliott buys their own discombobulation machine).

This applies to even – in the grand scheme of things – small issues. For example, in 2023 a group of institutional funds that held around $10b of VENZ and PDVSA debt banded together to form the Venezuela Creditor Committee (VCC) and sought, in part, to have New York courts bump out the maturities on their debt (read: agree to a tolling arrangement). In other words, something somewhat akin to an amend-and-extend.

But since the first Trump administration, back in 2019, recognized the leader of the Venezuelan National Assembly as Venezuela’s political leader, not Maduro, this meant that when the VCC brought their litigation there was, uh, confusion as to the appropriate counterparty.

This lasted for months until, in Nov 2023, an agreement was reached between the VCC and the opposition-backed National Authority to kick the maturities to 2028 – which, if one squints, solves the problem but in another sense is the definition of a paper solution (after all, while on paper the opposition might now be the quasi-issuer of this debt, in practice they are, uh, not able to action anything – and if that changes in the future, where what’s true on paper and in practice are in alignment, their equanimity in front of New York courts might as well).

Although I would hasten to add (as a broader point we’ll return to) that the U.S. Treasury has a habit in some sovereign restructurings of pulling a stunt not dissimilar to what we’ve seen from judges in some of our recent LME rulings in which a thin veneer of legalese is brushed over their opinion on what ought to be (often without much thought to pragmatism or the setting of precedence – not dissimilar to when another UST, the U.S. Trustee, pokes their nose into chapter 11s out of “principle” and then unleashes chaos). So, in the case of Venezuela, if a restructuring is to come, one would imagine a Secretary Bessent sized thumb firmly on the scale.

Anyway, what we saw in the first few weeks of Jan 2026 – as everyone was discombobulated and disoriented to different degrees – was a sudden resurgence of interest in Venezuela and PDVSA (but I repeat myself) debt. And much as with the Railway Mania two centuries ago, the macro narrative in the immediate aftermath of the Venezuela operation (Maduro out, must be favorable) superseded all consideration of the micro specifics (the eventual recoveries these scraps of defaulted paper will have and when the recoveries will practically flow).

One of the innumerable reasons I haven’t touched much on sovereign restructurings is that they’re, sure, drawn out and always a bit bespoke – but they’re also, as one would expect given the number of countries at any one time that are distressed, rare.

Which means that unless one works within a mile radius of the Arc de Triomphe the lessons of past sovereign restructurings – especially those that have had the U.S. squarely in the mix – can be forgotten in the heat of the moment, and those in opportunistic seats can get a little over their skis applying the intuitions they have about corporate situations to sovereign situations...

Note: When it comes to getting over one’s skis, that includes myself. Sovereign restructurings are not an area of focus (at all), and the below should all be treated as food for thought. Admittedly, I'm not immune to the siren song of sovereign debt but get my maladapted geopolitical thoughts out through polemics as opposed to positions. Also, as a word to the wise, don’t spend too much time here as no one will ever want to talk sovereign restructurings in an interview and generally it’s best not to show too much interest or talk at length about things you won’t be working on anyway (it can lead to the impression that you misunderstand what the day-to-day job involves, etc.).

BRIEF VENZ AND PDVSA NOTES FOR THE WEEK ENDED JAN 09, 2026

As saber-rattling vis-à-vis Venezuela became more intense through Q4 25, both VENZ and PDVSA bonds began to grind higher in sympathy with each other until, of course, a violent upward lurch occurred as the Truth-based saber-rattling turned into real-world kinetic action.

When the dust settled, and the week closed after the capture of Maduro, VENZ debt was up 9-11pts and PDVSA debt was up 7-10pts with the lower coupon bonds outperforming. Of course, volumes were pretty high – as few seemed shy about taking a position even though the capture didn’t represent a clean resolution that illuminated a clear path forward – at a little under $2b.

It takes two to tango, and what was observed through the week was that legacy holders – those that had been in the mix in some cases for years waiting for some catalyst – saw this as an opportunity to depart the complex while (as per GS and JPM trading desks) more opportunistic players that weren’t previously involved in the situation rushed in.

Look, no one knows the future (truer now than ever before, it seems). But until this all happened if you rung up someone (almost anyone!) and asked them what they thought the recoveries on VENZ debt would be they’d shrug and then say they’ve penciled in 25-35 like everyone else on claim value (which implies different trading levels depending on what one believes total claims will be – in other words, depending on the treatment of interest on interest which there are disagreements about).

But it’d be stressed on the call that this all amounts to fantasies about what could be and even if one is (somehow) confident in what the recoveries will be, one needs to (somehow) be confident in the timeline those recoveries will be realized on and what happens in the interim (lest the IRR drift ever lower as the timeline to realization marches ever further into the distance).

Anyway, based on the price action we saw through the first week sans-Maduro, there are two broad takeaways one should have. First, that somehow the actions of the administration will redound to somewhat higher recoveries than the consensus view was beforehand. Second, that in order for the price levels across the VENZ and PDVSA complexes to be sensical, a resolution will be needed in somewhat short fashion (read: this doesn’t kick the can another eight years or whatever).

In other words, it’s hard to look at the price action we saw and not conclude that the market (at least some corners of it) thought that the administration would both strong-arm a solution to the overlevered capstack of a sovereign somewhat quickly (read: low single-digit years) and in a manner that boosts recoveries of creditors all else equal (read: the price action isn’t purely signaling a bump up in the timeline to resolution). With the latter (lest the sovereign be left still too levered) requiring a pretty immediate and significant turnaround in the economic fundamentals of Venezuela based on the high levels of debt to begin with and the amount of past due interest that’s accrued.

Perhaps a better way to frame all this is that in the immediate aftermath of the capture of Maduro, there was an impression that this was the beginning of true regime change and the administration would ensure that what came after this change would be a regime aligned with U.S. interests.

And the surest way to do that would be to make the populace prosperous (read: if the average individual’s standard of living doubles a few years after a regime change then whoever receives the credit for precipitating that change will probably stand in good odor – most of the time, at least).

In the case of Venezuela with a current GDP of ~$80b – supressed after decades of economic suffocation – it wouldn’t take much to see GDP reinflate rather quickly: mix together sanctions relief, encouragement of foreign investment, remigration of those that fled over the last few decades, and a rejuvenation of the oil sector and that should do the trick. The first steps on the road to economic recovery aren’t the difficult ones (those come later as true potential GDP comes closer into view).

Anyway, the market seems to have believed that as these first few economic revitalization steps are taken – which could happen without much issue over the next 12-16 months – the contours of a full-scale sovereign restructuring, that’d encompass PDVSA, could be set.

And because when the contours are finalized and negotiations begin in earnest the GDP of Venezuela will have reinflated somewhat from its previously almost completely deflated state this would mean that significant recoveries for holders could be achieved because while the post-reorg level of debt would be high based on $80-100b of GDP, it’d be more modest, manageable, and reasonable based on $200b or whatever.

To back up for a minute, before the kerfuffle in Caracas VENZ bonds traded around 29 on par (or 17 based on the total claim if we count all accrued interest), and PDVSA bonds traded at 25 on par (or 15 based on the total claim if we count all accrued interest). So, with a sufficient ramp up in oil production, foreign investment resurgence, sanctions relief, capital control relinquishment, and a (somewhat) stabilized political system, sure, it’s not impossible to imagine a world in which there are ~45-50ish recoveries (based on par – so at a slight premium to where we’re trading now, and a much higher level than in Q3 2025 before anyone thought twice about a VENZ solution being in the offing soon).

It’ll all come down to the haircut – both on principal and past due interest – that is viewed as acceptable and which doesn’t overburden Venezuela going forward. But it’s not inconvincible that with 50-60% haircuts on both principal and past due interest, $30-40b of new official money, and GDP that bounces to $100b (possibly up to $200b) in the short-term, we could see debt-to-GDP in the ~50-60% context which should be agreeable. (Remember GDP was $350b in the early 2000s.)

Now, there might not be exact procedural parallels between corporate and sovereign restructurings but, of course, debt is debt, leverage is leverage, and thus no matter the type of issuer – sovereign or corporate – it all boils down to the same set of ideas that inform the end state and creditor IRRs.

Nuance aside, in both a corporate and sovereign context (outside some anomalous situations) what precipitates the need to restructure is an unsustainable capital structure – often one that the issuer themselves might not believe is unsustainable, but that the market has decided is (as we’ve previously discussed, often it’s a bit of a feather that broke the camel’s back situation where an issuer looks resilient in the face of bad headlines but then it all becomes a bit too much and their access to capital markets is suddenly foreclosed and their debt begins to trade down significantly).

Anyway, in a corporate context when we think about recoveries we, of course, think about EV as the representation of the value pie that will then be divided amongst holders. In the sovereign context it’s somewhat similar except the representation of value can be thought of as captured by GDP instead (which isn’t as fair of a representation but since multi-lateral institutions, who often pony up new-money post-reorg, care about debt-to-GDP it’s a representation that practically matters).

In both cases, at a high level, what we’re trying to back into is the right level of debt post-reorg that makes the issuer viable – a level that provides equitable value to pre-reorg holders that are not getting back what they originally bargained for but that also doesn’t burden the issuer such that they’ll perhaps land in the same spot in a few years (read: having to do yet another restructuring).

And, of course, if one thought that for all the superficial rigidity of the in-court process – how mechanized and formulistic it all looks – the process of determining the right value, and the right mix of consideration for holders, seems pretty subjective then it really is when dealing with sovereign issuers.

In both cases there’s the patina of formalism wrapped around a process that, at heart, is a kind of large-scale bargain that can be swayed by a myriad of non-objective factors (e.g., the willingness of large holders to be a nuisance; the intransigence of the issuer despite their current predicament; the involvement of quasi-third-parties like the UST, whether that’s the U.S. Trustee in the corporate context or the U.S. Treasury in the sovereign context; etc.).

Likewise, as we discussed at length in the corporate context, most often when a corporate files not only do they seem to not have a sustainable capital structure – at least based on what their EV is now, and what the market believes their EV will be in the future – but they often have de minimis cash (since capital markets were closed to them due to their unsustainable capital structure, etc.).

Thus, while it’s nice to file, have holders take a significant haircut, and delever – and that can make the post-reorg capital structure appear more sustainable on paper at emergence – there’s often the need for a significant cash infusion (whether to fund in-court costs or to have cash on the balance sheet to, like, operate after emergence while the ship is steadied). And, of course, this can be done through fresh debt or an equity rights offering as we’ve talked at length about before.

So, when we think about the post-reorg capital structure of a debtor, it’s both the new debt that’s consideration for the pre-reorg debt (if that’s part of the consideration makeup) and the new debt raised to fund in-court costs and/or put cash on the balance sheet at emergence (if that’s done).

Likewise, in a sovereign context, things tend to happen gradually then suddenly. In the case of Venz, they’ve been more or less frozen out of traditional capital markets for almost a decade since, well, they stopped paying interest (which is one of those things that tends to make people skittish about lending to you – well, that and all the sanctions, I suppose).

Thus, when we think about how to back our way into what we believe will be a sustainable capital structure we need to think about the possible aggregate debt levels post-reorg relative to GDP (read: debt-to-GDP). And the aggregate debt will be comprised of both the potential new debt provided to pre-reorg creditors as consideration for their holdings and then new debt raised to support the sovereign post-reorg (e.g., most often from multi-lateral institutions who, as previously mentioned, really care about post-reorg debt-to-GDP levels).

But, of course, this all becomes a bit circular – because, at base, the amount of haircut that current holders will “need” to take will be informed by both the amount of new-money believed to be “required”, and how GDP is expected to evolve in the near-term.

Or, put another way, the amount of new-money that can be raised will be limited by what’s believed to be an acceptable debt-to-GDP ratio (one that is “sustainable”) and the amount of post-reorg debt provided to current holders as consideration for their holdings. It all depends at which end of the concentric circle one begins at.

And much like a company in a volatile sector that’s fallen on hard times, it’s often the case that when a sovereign restructures everyone acknowledges it’s at (or near) the nadir of its GDP – that this level of GDP is far below its potential and it’ll rebound quickly. Thus, while 30-60% debt-to-GDP might be the ideal, safe level to aim for, is that based on near-term GDP or what consensus forecasts are for GDP 24, 36, or 48 months out?

In other words, can the sovereign “emerge” a bit more levered than one would hope for at time zero based on the assumption it should look appropriately levered in a few years as its economy reinflates? Is it a disservice to base recoveries on near-term GDP when that’ll make debt-to-GDP look low in short succession?

Of course, nowhere is this dilemma – over what GDP level is reasonable to expect – more obvious and stark than in Venezuela where there’s been years-long entrenchment of Chavismo with the sovereign cut from capital markets over the last eight years (since its default) and its GDP collapsing to what appears to be near the minimal viable level (from ~$350b to ~$80b in a few decades).

Note: One way to paper over this dilemma – to an extent – is to have a larger nominal haircut but have some of the consideration mix come in the form of Value Recovery Instruments (VRIs) linked to either GDP or commodity-related revenue (read: providing creditors some participation in the “upside” or “turnaround” of the sovereign, in the case of Venz perhaps through VRIs linked to the performance of state-owned energy companies or oil prices outright). I’m personally (for what little it’s worth) skeptical of all this in the Venz context and see VRIs or other forms of contingent instruments as potentially something that can be a modest tool in the toolbox at most (something that can bridge a narrow gap between both sides, if needed). Because with the kind of debt load we’re talking about here, and creditor appetite (or lack thereof) for more equity-like instruments comprising a significant part of their consideration, I don’t see this as a viable, real-world solution to start from.

Here’s a nice summation from GS’ EM desk in late-2025 (Dec 15) that sketched out what was more or less consensus at the time (with not much changing in the market’s mind after the capture of Maduro in terms of the variables except, for some, penciling in a bit higher GDP and a bit faster timeline...).

Anyway, the final variable to add to the mix that’s worth a brief discussion – because it’s high vol impacts pricing on the screens – is time. While pricing is informed by factors that are more traditionally thought of as informing recoveries (e.g., how big the pie will be, what types of slices everyone is getting, who will be taking what slices, etc.) it’s also informed by the timeline on which the anticipated restructuring will happen – which is, as much as anything can be, more of a raw geo-political calculation (since it’s more or less informed by when the current regime sufficiently changes or when a new government deemed legitimate enters into office and then how much they prioritize, perhaps with the cajoling of the UST and State, the beginning of a restructuring process).

This is a point that I spent quite a bit of time harping on in the Bond Math Guide and the Case Study Guide. Because even in a corporate context timelines are apt to change and even if one is right on the “fundamentals” (e.g., the anticipated recoveries) if one is wrong on when those recoveries will be realized (e.g., when a company will file, how long it’ll take to emerge thereafter, etc.) then that can skew returns to such a degree that it changes whether it was a worthwhile trade to enter into or not.

While it’s impossible to disentangle all the contributors to upward price action when you’re dealing with a unique situation – and I would think the extraction of the leader of a country in the dead of night thanks to discombobulation devices would qualify – there are without doubt some shops that decided to take a kick at the VENZ / PDVSA can in the immediate aftermath because they thought, “Well, if at T-1, before the extraction, the price of this bond was [X] then all else equal the price at T+1, right after the extraction, should be higher because the timeline on which a recovery can be realized has to be at least somewhat shorter than it was before. Maybe GDP will increase because of more U.S. directed reforms, etc. in the short-term and thus boost recoveries, maybe not. But we don’t need to engage in some scenario analysis on that right now – if we receive the same recovery but sooner than we were expecting before, then that recovery is per se more valuable now. QED.”

The above quote more or less matches the chatter – at least coming out of the distressed desks that were flipping VENZ/PDVSA debt at a rapid clip – in the 24-72 hours after the capture. However, it seemed to me at the time (and more so as the week came to a close) to be at odds with both our most recent experience with more UST-involved sovereign restructurings and also the President’s own, uh, disposition toward creditor treatment in restructurings (see: the old yarns in The Vulture Investors by Rosenberg – published in 2000 and that I’ve referenced before – which feature a few Trump default stories alongside some cameos from those that would also go on to have a larger public profile than they had at the time like the then young-ish Ken Moelis).

To this end, late on Friday (Jan 9) an executive order was issued that declared a national emergency to “…safeguard Venezuelan oil revenue held in U.S. Treasury accounts for attachment or judicial process, ensuring these funds are preserved to advance U.S. foreign policy objectives”.

Which amounts to a pretty clear message to creditors that Venezuelan oil revenue – which before Maduro’s capture was, of course, at arms-lengths from creditors – will continue to be at arms-length from creditors because that revenue is explicitly tied to the ambiguous advancement of U.S. natsec and foreign policy interests.

In other words, the typical tools of attachment and enforcement weren’t operative before and may not be operative now or in the future because the order “…blocks any attachment, judgement, lien, execution, garnishment, or judicial process against Foreign Government Deposit Funds.” With Foreign Government Deposit Funds defined as including “…the Venezuelan oil revenues and diluent sales held in U.S. Treasury accounts.”

So, who do these funds belong to? Well, the order continues that it “…affirms the funds are sovereign property of Venezuela held in U.S. custody for governmental and diplomatic purposes, not subject to private claims”. Which most would read (although there are disagreements) as requiring that until the U.S. Treasury deems a valid government to be in place, no matter how much funds accrue, over whatever length of time, these funds will not be up for grabs – and when they are, it’ll be up to the “valid” government vis-à-vis how they’re used (or not) as part of a restructuring transaction. (Or at a minimum the UST will have, in the interim, significant say in how these funds are used by Venz.)

In the immediate aftermath of the Maduro capture, there was a narrative that it was going to somehow be an essential component of the Donroe Doctrine to take an active interest in turning Venezuela around and cleaning up Venezuela’s legacy debt. For reasons that remain elusive, the narrative was (is?) that this latter point would be a foreign policy win for the administration.

While perhaps more skeptical than most, I’m not sure that the most pressing matter on the Donroe docket is significant time and energy being placed to support a fundamental rejiggering of Venezuela’s economy and a restructuring of VENZ and PDVSA debt.

And even if it were to be that a more fundamental rejiggering and restructuring was sought, would the likelihood be that the administration would ensure that it’s on favorable terms to creditors or would the administration look around and find it more favorable for a bunch of opportunistic funds to take a bit bigger hit on their debt so that Venezuela can emerge with a reasonable debt load and the administration can look equanimous for keeping the prying creditors at bay and do that instead?

The foreign policy win for the administration is surely not to leave a bunch of holders of long since defaulted VENZ and PDVSA paper with nice IRRs, but the sovereign itself burdened by a still significant debt load that leads to resentment and bitterness that festers over time as the new government feels stymied due to the “unjustified” level of debt they were strong-armed into maintaining (with the salt in the wound that the debt was layered on by an old government with, presumably, minimal linkages to the new government).

Given this, the current situation might not be a repeat of Iraq, but from the EO it does look an awful lot like it rhymes. Because in 2003 the Bush administration signed EO 13303 (Protecting the Development Fund for Iraq and Certain other Property in Which Iraq Has an Interest) that, no different than the Trump administration’s EO, shielded certain Iraqi funds and revenues from attachment and, by extension, removed one of the most important ways for creditors to flex muscle in a sovereign restructuring.

In other words, in both cases one of the most important sources of ongoing cashflow – of value – to creditors was deemed by both administrations better used to support the sovereigns in the future than used in some sense to repay the debts of the past accrued by regimes that have been ousted, replaced, or reconfigured (pick your euphemism). Again: an obvious thing to do from a foreign policy perspective, but one that leaves creditors a bit in the lurch.

Now, things can always change – and with this administration perhaps a few times in a few different directions. But of interest – and in support of the possibility that we’ll perhaps see an Iraq-approach taken, not a new Third Way designed de novo – is that in the President’s roundtable discussion with oil executives, it seemed like the President at least partially adopted a “what’s done is done” attitude toward legacy claims.

Because when Ryan Lance – the CEO of ConocoPhillips – brought up ConocoPhillips’ old $12b claim against Venezuela due to losses incurred from a past nationalization of their assets, the President joked that it’d be a “good write-off” and that companies like ConocoPhillips would “…start with an even plate” in Venezuela.

To be fair, this is somewhat orthogonal to more classic VENZ and PDVSA claims that’ll be at issue in an eventual restructuring. But it speaks to a mindset – that has been shared across administrations when it comes to sovereign restructurings in countries where the U.S. has natsec interests – that it’s better to see things start from a relatively clean slate (or an “even plate”, in this case) than to strong-arm a few extra points of recovery out of a sovereign which could potentially bread resentment and bitterness that’ll rear its head in the future.

With all that said, if we take the admin at face value, then while this might be regime change it’s a revamped style from what we became accustomed to in the early-aughts with the definition of change in the admin’s mind perhaps less “removal” and more “recalibration”. Thus, insofar as Rodríguez, et al. can engage with the admin in a more constructive fashion to make the changes the admin would like to see – the removal of the ELN and other groups active in Colombia, the stop of drug trafficking, an operational restructuring of the oil sector, and the end of Venezuela “cozying up”, in the words of Sec Rubio, to adversaries in search of a foothold in the Western hemisphere – then the thornier, messier, more time-intensive work of a proper sovereign restructuring that places Venezuela on a pathway toward a more durable economic future can be shelved for a bit.

Which all means that if the rationale for some opportunistic funds getting into the mix post-capture was less based on a change in recoveries and more on when those recoveries would flow (read: much sooner than previously thought), then it’s not that this rationale has been disproved but it’s at least a bit more doubtful than it was when MH-47 Chinooks were flying low over Caracas...

BRIEF VENZ AND PDVSA NOTES FOR THE WEEK ENDED JAN 30, 2026

With the close of this week what we saw (although opinions differ, of course) is more aligned with what I expected at first blush: that this is less true regime change than regime recalibration, and that while the capture of Maduro might accelerate the timeline on which a restructuring occurs, and might precipitate reforms that lead to enhanced GDP, there’s no real restructuring-related time pressure felt by the administration and, when push comes to shove, if there’s any thought that more favorable creditor treatment could undermine the natsec and foreign policy aims of the administration than such favorable treatment won’t likely occur.

And this has all begun to be reflected in the price action we’ve seen after the first week of tumult: bonds this week closed around a point higher (give or take a few bps across the complex) with VENZ debt outperforming PDVSA a touch (as modest concerns rise that maybe whatever restructuring occurs will see Republic debt take priority over PDVSA debt – I have my doubts on that, but it’s understandable that there’s a bit higher of a risk premium attached to PDVSA debt, so fair enough).

While uncertainties still abound, this week saw a crystallization of the admin’s strategy going forward – one that can perhaps be summarized as managing Venz as it exists now to best serve current natsec and foreign policy aims, with more structural issues on the back burner for the time being.

For example, this week saw the National Assembly’s passage of a new hydrocarbons bill which then led to OFAC issuing a new general license that authorizes oil-related transactions between U.S. persons and VENZ/PDVSA so long as contracts are governed by U.S. law and payments are directed to the Foreign Government Deposit Funds outlined in the previously discussed Jan 9 executive order.

Of interest, and it shouldn’t be a surprise, is that the license excludes any transactions that involve Cuba, China, Iran, North Korea, and Russia in an attempt to halt Venezuela’s capacity to implicitly support U.S. geo-political adversaries (or, from the other side of the ledger, have these adversaries develop a stronger foothold in Venezuela through closer economic ties).

While not a surprise, it does raise questions as to how China, who holds around $12-13b of Venz debt, will be treated in a future restructuring transaction based off of this (read: does this signal a potential where not all applicable creditors will be treated pari in a future restructuring – there’s no clear answer, and I have my doubts a bifurcation would be worth the inevitable delays and complications, but worth keeping in the back of one’s mind).

More of note – and what did cause more downside price action before things reset on Friday – was Sec. Rubio’s Senate testimony that shed light on the current flow of funds. As of this week, $500m from initial Venz crude sales have been placed in Qatari accounts in Venz’s name – done explicitly to prevent creditor attachment or seizure or, in his own words, to avoid revenues being “…picked apart by creditors”.

Rubio went on to acknowledge that “…we will eventually have to take care of creditors” but didn’t elaborate much beyond that (not to enter into a semantics squabble, but note the use of have instead of will which suggests, based on the tone taken throughout, that pre-existing creditors are thought of as more of an obstacle to be dealt with rather than a favored party to be prioritized moving forward).

Further, to revisit what “change” means in the context of this regime change, it’s beginning to look more like Rodríguez is pursuing an accommodative stance on administration priorities (e.g., the new hydrocarbons law, release of U.S. prisoners, etc.) with the belief that if this is done true regime change (via free and fair elections) can be kicked down the road (perhaps through planting the idea that such change runs the risk of a less accommodative government entering into office, etc.).

Which all means, for creditors, that the situation continues to become more nuanced and the similarities to Iraq begin to become clearer. On the one hand, the steps that look like they’ll be taken (although it’s still early days) should enhance GDP, and all else equal there’s no doubt a restructuring should still occur on a quicker timeline than if Maduro was still in power.

However, if a restructuring isn’t a priority of anyone that could precipitate it right now, then we could still be looking at a timeline that stretches years into the future (read: only beginning after significant economic liberalizations occur and a political transition occurs). In other words, the notion that recoveries, all else equal, will be higher than they appeared to be a month ago remains true (hard for that not to be the case with how deflated GDP was pre-capture). But, on the other hand, and as I’ve harped on, the timeline matters – and while Rubio acknowledges that “eventually” creditors will need to be dealt with, in the admin’s priority list the restructuring of VENZ/PDVSA debt is quite clearly subordinate to natsec and foreign policy aims...

APPENDIX

In case it’s of interest, below are a few good pieces from over the years. Note that Moatti and Muci’s framework is the most frequently cited that I’ve seen on Venz, despite its age. But, of course, until rubber meets road – whenever that is – it skews to the more philosophical end of things rather than the practical. (There are some additional reports from GS, etc. on Venz, including one with some revised recovery estimates from back in 2023, in the members area.)

• Moatti and Muci – an Economic Framework for Venezuela’s Debt Restructuring (2019)
• Lazard – Policy Brief: The 2020-2025 Sovereign Debt Crisis (2025)
• Lazard – Policy Brief: Domestic Debt Restructuring, An Exercise in Laser Surgery (2023)
• Gelpern – The Strained Marriage of Public Debts and Private Contracts (2017)
• Hinrichsen – Tracing Iraqi Sovereign Debt Through Defaults and Restructuring (2019)