Citgo proposes debt refinance: Update

Adds Fitch guidance.

Citgo's US parent company plans to refinance $1.9bn in debt due next year, the Venezuelan-controlled US independent refiner said today.

The plan would reduce the risk of a forced debt repurchasing if Venezuelan national oil company PdV were to lose control of its US subsidiary but it would rely on an untested board, Fitch Ratings agency noted.

Citgo Holding plans to redeem and repay $1.87bn of principal and related interest and premiums due next year through a refinancing that includes $1.37bn of secured notes due in 2024 and another $500mn four-year term loan.

Citgo proposed the refinancing as debate continues over who controls the company. Venezuelan president Nicolas Maduro's government filed suit in Delaware's Chancery Court last month to press its legal claim to control the refiner, a PdV subsidiary with roughly 750,000 b/d of US refining capacity and a network of terminals and pipelines in the eastern US.

The US withdrew recognition of Maduro's government this year and issued sanctions against PdV in January blocking business with the Opec member. A group of 55 mostly western nations instead recognize National Assembly leader Juan Guaido as interim president to oversee new elections. The assembly appointed new administrative boards for PdV, Citgo and its Delaware-based holding companies in February.

Fitch Ratings views the proposed severance with PdV, as well as changing the required steps in the event of a change in corporate control, an improvement.

"Fitch believes governance is set to improve at the company post-separation and will continue to monitor the situation," the agency wrote. "Challenges remain, including a lawsuit by the Maduro-appointed board to attempt to regain control of Citgo."

US federal courts have generally deferred to President Donald Trump's recognition of the Guaido government in the more than a dozen lawsuits from Venezuelan creditors seeking access to Citgo to satisfy their debts. But while the opposition holds a majority in the National Assembly, Guaido has yet to exert control over companies or other institutions inside Venezuela.