A New York federal judge has ordered Petróleos de Venezuela SA (PDVSA), Venezuela’s state-owned oil company, to pay $2.86 billion to bondholders, marking the latest chapter in a yearslong legal battle over the country’s defaulted sovereign bonds and the ownership of Citgo Petroleum Corp.

In a ruling issued Friday, U.S. District Judge Katherine Polk Failla entered final judgment against PDVSA and its subsidiary PDVSA Petróleo SA, finding them jointly and severally liable for the debt. The judgment also dismissed PDVSA’s own lawsuit against MUFG Union Bank NA (the bond trustee) and GLAS Americas LLC (the collateral agent) with prejudice.

Judge Failla said there was “no just reason for delay” in entering judgment, concluding that the matter was ripe for resolution following her September ruling that the disputed PDVSA 2020 bonds were validly issued under Venezuelan law.

The $2.86 Billion Judgment

The total judgment stands at $2.86 billion, and Judge Failla ordered that over $609,000 in interest will accrue each day after Friday until payment is made. The court deferred a ruling on attorney fees and litigation costs—expected to total tens of millions of dollars—until after PDVSA’s forthcoming appeal to the Second Circuit Court of Appeals.

“Deferring consideration of the fee petition pending the outcome of plaintiffs’ appeal will better conserve both judicial and party resources,” PDVSA said in a letter to the court, a position Judge Failla accepted.

Years of Litigation Over Citgo-Backed Bonds

The dispute centers on PDVSA’s 2016 bond swap, which allowed investors to exchange near-term debt for new bonds maturing in 2020 and secured by 50.1% of Citgo Holding Inc., the U.S.-based parent of Citgo Petroleum.

In 2019, PDVSA—by then under the control of an ad hoc board appointed by opposition leader Juan Guaidó—filed suit in New York, arguing the 2020 notes were “illegal and void” because President Nicolás Maduro’s government had not received authorization from Venezuela’s National Assembly before pledging Citgo as collateral.

Initially, the district court ruled in 2020 that New York law governed the validity of the bonds and upheld them as enforceable. But in 2024, the Second Circuit Court of Appeals asked New York’s Court of Appeals to clarify which law applied. The state’s high court held that Venezuelan law governed the bonds’ validity, sending the case back to Judge Failla to decide whether the notes were valid under Venezuelan statutes.

After what she described as an “exhaustive review of Venezuelan law,” Judge Failla ruled in September 2025 that the bonds were valid, reaffirming summary judgment for MUFG Union Bank and GLAS Americas.

PDVSA’s Arguments Rejected

PDVSA had contended that the bonds were unlawfully issued because Maduro lacked legislative approval and that they jeopardized Citgo, one of Venezuela’s most valuable foreign assets. The company argued the notes were part of an illegitimate financial transaction executed by an unconstitutional regime.

Judge Failla rejected those arguments, siding with the financial institutions and concluding that PDVSA “failed to demonstrate any defect” that would render the notes unenforceable under Venezuelan law.

Bondholders and Trustees Seek Full Compensation

In a joint letter Thursday, Union Bank (now succeeded by U.S. Bank National Association) and GLAS Americas told the court that the judgment was worth $2.86 billion, and interest was accruing rapidly. They emphasized that the bond trustee and collateral agent had been forced to front tens of millions in legal costs over nearly six years of litigation.

“The trustee and the collateral agent are entitled to a judgment for these out-of-pocket fees and expenses now,” the firms wrote, noting that doing so “is likely to minimize further proceedings in this court in the future.”

Representation and Case Details

For MUFG Union Bank NA and GLAS Americas LLC:

• Paul Weiss Rifkind Wharton & Garrison LLP: Jeff Recher, Paul Paterson, Roberto Gonzalez, and Andrew Rosenberg

• Clark Smith Villazor LLP: Chris Clark, Virginia Tent, Brian Burns, and Andrew Rodgers

For PDVSA and PDVSA Petróleo SA:

• Paul Hastings LLP

For PDV Holding Inc.:

• Willkie Farr & Gallagher LLP

For the Bolivarian Republic of Venezuela:

• Munger Tolles & Olson LLP

The case is Petróleos de Venezuela SA et al. v. MUFG Union Bank NA et al., Case No. 1:19-cv-10023, in the U.S. District Court for the Southern District of New York.