Citgo sale process to proceed

A process to establish the sale of shares of Venezuela's state-controlled US refiner Citgo will move forward after a federal judge today denied a request to pause the process while Venezuela seeks an appeal.

US Delaware District Judge Leonard Stark denied the request to halt that work while Venezuelan national oil company PdV, Citgo and Citgo's US holding company appeal a decision to move forward with a sale process to the 3rd US Circuit Court of Appeals.

"I am not persuaded that this appeal is even going to be heard by the Third Circuit," Starks said in a hearing today. The judge added that he did not consider the appeal filing frivolous and noted that any final sale could not move forward without US executive branch approval under current US sanctions against Venezuela.

"I believe this sale will have to be held someday, and I believe a lot of work has to be done between now and that day," Stark said. "If we do not get moving on doing that work now, while the Venezuela parties are pressing their appeal, the result is likely to be nothing more than more delay and more unwarranted harm to Crystallex."

Stark plans to interview three candidates to be appointed as a special master consulting on the best procedure to sell the minimum number of Citgo shares necessary to satisfy an international arbitration judgment.

PdV, Citgo and its US holding company, PdVH, last month appealed the decision that allowed the development of a process to sell shares of the US refiner to satisfy holders of a more than $1.4bn international arbitration claim against Venezuela.

Tenor Capital Management through US courts sought $1.4bn plus interest that international arbitration determined that Crystallex, a defunct Canadian mining company it controls, was owed for Venezuelan gold mining interests expropriated roughly a decade ago.

The Delaware court determined in 2018 that Citgo's close control by the Venezuelan government made the US company liable for the government's debts. But US sanctions in 2019 to support opposition leader Juan Guaido further complicated creditor efforts to extract compensation through US litigation. Any exchange of bonds or shares recognized in the US requires Treasury Department approval, giving the executive branch a final say on the court outcomes. Former president Donald Trump's administration warned that the loss of control of Citgo would deal a serious blow to the Venezuelan opposition and US interests in the country. President Joe Biden's administration has in its time so far maintained the status quo.

Citgo continues to finance debt and operate through the legal and political turmoil. The 770,000 b/d refiner can process difficult heavy and sour crudes in prime US Gulf coast and midcontinent markets.

By Elliott Blackburn