Venezuela’s foreign creditors have long had their eyes on” Citgo Petroleum Corp ” (Citgo Petroleum Corp), the refining company based in the United States, and the largest asset of Venezuela, the South American country, abroad. After a long legal battle, it seems that “Citgo” will become within their reach, in light of the court-ordered auction procedure to hold it and expected to begin next month.
But it seems that the sale may face a hurdle worth 40 billion dollars.
That is the value of the security bond that PDV Holding Inc, which owns Citgo, says the parent company, state-owned Petroleos de Venezuela, will have to deposit before issuing “pdvholding” the alternative share certificates needed to proceed with the auction.
“Petroleos” has previously stated that it will not be able to repay any guarantee bonds as a result of US sanctions imposed on Venezuela.
Creditors claim that the purpose of the Guarantee claim is to slow down or stop the “Citgo” auction, which could raise about 14 billion dollars to pay off arbitral awards issued against Venezuela, along with other claims resulting from the wave of nationalization initiated by the late President Hugo Chavez in the first decade of the Millennium. Miguel Estrada, a lawyer for one of the largest creditors, said earlier this month that the value of the requested bonds was artificially high, most likely aimed at blocking the sale.
Representatives of “BDV” did not respond to requests for comment, but the company said in documents submitted to the court that the guarantee bonds are imposed by law. The Delaware Supreme Court judge authorized to rule on the issuance of stock certificates will hold a hearing on the matter on Friday.
Like the painstaking litigation process, the source of the complications surrounding the guarantee is the strained relations between the United States and the two socialist Venezuelan governments headed by Chavez and his successor, President Nicolas Maduro. As a result of the United States ‘ opposition to Maduro, Petroleos no longer directly controls “BDV” and “Citgo”.
Petrolius ‘ lawyers explained that they believe that asking a sanctioned state-owned company to deposit a USD 40 billion security bond is a doomed idea from the start, writing in a document, “even if the company is able to provide a compensation guarantee, the PDV claim is overvalued”.
“Petroleos” is counting on sanctions to avoid taking responsibility for the proposed guarantee, but a federal appeals court prevented the state-owned oil company from invoking sanctions for non-payment of the amounts owed on a loan of 348 million dollars defaulted.
It will be “Crystallex International Corp “(Crystallex International Corp), the Canadian exploration company whose rights to the” Las Cristinas ” Gold Field were confiscated by Chavez, or whoever receives a significant part of the proceeds from the auction. An arbitration committee of the World Bank has decided that Venezuela owes the company “kristalex” in the amount of 1.4 billion dollars, part of which was paid by the state, while the company is still seeking to recover about a billion dollars.
Kristalex was the first to target Citgo, and the US District Court Judge, Leonard Stark, ruled in 2021 that the refining company must be sold to repay the arbitration award, and appointed a special judicial supervisor to oversee the auction, marketing materials are expected to be sent to potential buyers on October 23, while the deadline for official bids will be January 21, 2024.
No company has publicly expressed interest in participating in the “Citgo” auction; any sale must be approved by the US Treasury Department, due to sanctions.
