PdV exchanges Dominican refinery stake for debt

Venezuela's state-owned PdV has transferred its 49pc stake in the 34,000 b/d Refidomsa refinery to the Dominican Republic in a debt-for-equity transaction that could set a precedent for Venezuelan asset sales and debt restructuring.

The Dominican government paid $88.13mn for the refinery stake in exchange for the retirement of defaulted PdV corporate and Venezuelan sovereign bonds held by Dominican private-sector conglomerate Grupo Rizek, people close to the deal tell Argus.

In back-to-back transactions, Grupo Rizek's financial vehicle PATSA purchased the refinery stake from PdV and immediately on-sold it to the Dominican government.

The bonds were retired at far below their nominal value but above the secondary market value of pennies on the dollar, Argus was told.

The purchase of the PdV asset was done at an "advantageous" price for the Dominican Republic, finance minister Jose Manuel Vicente said yesterday. "This will allow the government to control the company's expansion plans and strengthen it as a player in the hydrocarbons market," he said.

According to the finance ministry, PdV had acquired its stake in the refinery, near Santo Domingo, in 2010 for $131mn.

Refidomsa is among several Caribbean refineries that PdV once promised to expand but later abandoned as it struggled to sustain crude production and meet its overseas obligations, particularly after the US imposed financial sanctions on Venezuela in 2017 and oil sanctions two years later. Venezuela's government blames the sanctions for causing it to default on its debt obligations.

Saddled with billions of dollars in debt, Caracas is hoping the modest Dominican deal will establish a framework for other debt-for-equity transactions encompassing local and international assets as it engages diplomatically to break an impasse with the US-backed opposition and lift sanctions.

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For Santo Domingo, the transaction will restore Refidomsa's access to local and international credit to finance an upgrade of the refinery. And for Grupo Rizek, the deal takes defaulted obligations off its books.

The US had no objection to the completion of the PdV asset purchase, Vicente said. "Before completing the purchase, the government consulted with the US to ensure that the transaction did not present any type of problem because of sanctions," he said.

Elsewhere in the Caribbean, Jamaica confiscated PdV's 49pc stake in the island's 35,000 b/d Petrojam refinery in 2019, claiming the company had reneged on a plan to upgrade and expand the facility.

In Cuba, state-owned Cupet quietly took over PdV's 49pc interest in the 65,000 b/d Cienfuegos refinery in 2017.

PdV also lost assets in Curacao and Aruba which had been key parts of its Dutch Caribbean logistical network.

By Patricia Garip and Canute James