Restructuring 2026

A contemporary restructuring would be documented in parallel layers that close in a coordinated manner; however, today there is an additional layer in the case of Venezuela (that of sanctions) and, within each layer, significantly more complex instruments. It is also pertinent to contextualize the timeline: as of this date (September 2026), the process remains in a preparatory phase, rather than that of a launched exchange. Venezuela formally announced the commencement of the process on May 13, 2026, designated Centerview Partners as financial advisor, and set as its next milestone the presentation of the macroeconomic framework and the Debt Sustainability Analysis (DSA).

A) Enabling layer: sanctions / OFAC.

Every step—retaining advisors, negotiating, settling, issuing new debt, dealing with blocked persons—requires a license. The retention of the financial advisor was authorized under OFAC General License No. 58 in May 2026; subsequent stages would require additional licenses expressly authorizing the issuance and settlement of the new securities. Without that framework of licenses, no trustee, fiscal agent, or committee can even sit down to document.

B) Preparatory and negotiation layer.

It comprises: the announcement of commencement; the debt sustainability analysis (DSA) and the macroeconomic framework, which serve as the analytical anchor for haircuts—with the distinct feature that, unlike other major restructurings, the DSA does not bear the endorsement of the IMF; the engagement letters (financial advisor, New York and Venezuelan legal counsel, information agents); the formation of creditors' committees—sovereign bondholders, PDVSA bondholders, arbitration and litigation creditors, and commercial trade vendors—along with their respective Non-Disclosure Agreements (NDAs); and the term sheet or preliminary terms and conditions.

C) Transactional / execution layer (the exchange offer proper).

This is the modern equivalent of the Brady Plan package, and its core would comprise:

• Offering Memorandum / Invitation to Exchange (offering memorandum): the document under which legacy bonds are surrendered in exchange for new instruments.
• Consent Solicitations and Exit Consents: to amend or strip covenants from non-tendered bonds, leveraging existing Collective Action Clauses (CACs), where applicable on a series-by-series basis (75%/85%), alongside mechanisms such as “exit consents”, to minimize the appeal of holdout strategies.
• The new instruments, issued under a fiscal agency agreement or an indenture with a trustee, and surely featuring aggregated CACs to permanently resolve forward-looking holdout risks. The menu could combine new bonds issued by the Republic and PDVSA (certain commentators have suggested consolidating the debt under the sole obligation of the Republic), a past-due interest (PDI) bond for accumulated unpaid interest, and contingent recovery instruments (warrants) tied to oil prices or GDP growth, which academic literature proposes as a central mechanism to bind holdout creditors.
• Legal covenants: New York (and/or English) governing law, submission to jurisdiction, waiver of sovereign immunity, pari passu under the "post-2016" standard formulation that avoids Argentina-style litigation, and designation of trustee/fiscal agent, paying agent, exchange agent, and information agent, complete with exchange listing (probably, Luxembourg Euro MTF) and clearing mechanisms (Euroclear/DTC).
• Special treatments outside the general exchange: the PDVSA 2020 bonds and their collateral pledge over CITGO—currently subject to an awarded auction and under appeal—will likely require bespoke treatment; ICSID/arbitral awards are documented via separate settlement agreements; and domestic debt proceeds under its own track and local law.

D) Domestic public law layer (Venezuelan authorization):

This is the juncture where a contemporary restructuring is more difficult to document than the Brady Plan. Under the LOAFSP, an authorizing law is in principle not required for refinancing or restructuring operations that reduce interest rates, extend maturities, or lower costs for the benefit of the Republic; however, upon this flexible foundation weighs the question of whether the new instruments constitute contracts of national public interest (Articles 150, 151, 187, and 247 of the CRBV) and the lingering precedent of Supreme Tribunal Ruling No. 2241/2002.

"Instruments" is deliberately broader than "bonds", because the package delivered in a modern restructuring typically combines components that are not exclusively ordinary debt bonds.

Breaking down what the term may encompass. Hypothetically, the restructuring may include:

• New bonds proper. Debt securities replacing legacy instruments (new bonds issued by the Republic and/or PDVSA) and, typically, a specific Past-Due Interest (PDI) bond for accumulated unpaid interest. These are indeed bonds and are customarily documented under a fiscal agency agreement or an indenture with a trustee.
• Contingent value recovery instruments (oil- or GDP-linked warrants). Legally they are not bonds. They do not guarantee a fixed stream of principal and interest payments; they pay only upon the satisfaction of specified conditions (crude oil price, production volume, GDP growth). They are issued as detachable securities, governed by their own warrant agreement or deed, and trade separately.
• Cash component (cash sweetener or upfront closing payment), if that is the case, which is not a security but cash consideration.
• Equity instruments or rights, should any of the proposed debt-for-equity swaps or development rights over oil, gas, or minerals materialize. These would constitute equity or economic rights, rather than debt.
• Consent fees (consent fees) to early supporters.

The reason why the distinction matters is twofold. First, documentary: each type requires a separate contract (bonds under an indenture/fiscal agency agreement; warrants under their own deed; equity presumably under a corporate structure), meaning "the new instruments" are not exhausted in a single document. Second: if part of the consideration ceases to be a bond and becomes capital or hydrocarbon rights, the intensity of the constitutional analysis may shift substantially.