A US appeals court upheld the validity of a series of bonds issued by Venezuela’s state oil company, clearing the way for holders to seek payment from the sale of Citgo Petroleum Corp.’s parent.

In an opinion published Tuesday by the US Court of Appeals for the Second Circuit, a three-judge panel confirmed that the notes, issued in a debt swap by oil company Petroleos de Venezuela SA and due in 2020, were deemed valid under Venezuelan law, affirming a partial judgment of a district court. The decision confirms the bondholders’ rights to collect payment from the court-ordered sale of PDV Holding, Citgo’s parent, which is taking place in Delaware.

The Houston-based refiner is Venezuela’s most valuable overseas asset, and it’s at the heart of a years-long battle with the oil-rich country’s myriad creditors.

The PDVSA bonds are backed by a controlling stake in Citgo’s parent, giving bondholders priority over other creditors seeking to seize the asset. Venezuela has been challenging the validity of the securities since 2019, arguing that the operation and the collateral needed to be a approved by the nation’s legislature.

“Under Article 150 of the Venezuelan Constitution, the National Assembly’s pre-approval was not required to validate PDVSA’s exchange offer, and the governing documents are thus valid,” US Circuit Judge Beth Robinson wrote for the panel. “And the act-of-state doctrine does not require us to give the Resolutions their purported extraterritorial effect.”PDVSA may try to seek rehearing by the full New York-based court or ask for review by the US Supreme Court. Lawyers for PDVSA didn’t immediately respond to emails seeking comment on the ruling.

The opinion has massive implications for the auction of Citgo’s parent. Amber Energy, a group affiliated with Elliott Investment Management, was declared the winner of the court-ordered auction in November 2025. The result of the auction is separately being appealed. Amber’s proposal includes a $2 billion deal to pay off the notes, but other bidders argued that bondholders shouldn’t be included until there’s a final decision on their validity.

“This interpretation was adopted to promote the stability of bonds governed by New York law,” said Jose Ignacio Hernández, senior specialist at consultancy Aurora Macro Strategies. “Now, the future of that collateral will, in all likelihood, be decided within the context of the sale process of PDV Holding shares — a matter currently before the Third Circuit Court of Appeals.”A hearing was held earlier this month before the Third Circuit, but a decision on the matter is expected to take months. However, the main issue blocking the sale is the lack of authorization by the US Treasury’s Office of Foreign Assets Control, as sanctions currently ban any transfer of PDVSA’s property and also prevent bondholders from taking over the collateral.

The $5.9 billion bid by Amber Energy would extinguish about $8.8 billion in claims attached to the process. Nonetheless, the deal is seen by senior US officials as grossly undervaluing the asset.

The case is Petroleos De Venezuela SA v. MUFG Bank NA, 25-02652, 2d US Circuit Court of Appeals (Manhattan).