Trustees seek time in Venezuelan debt case

Venezuela's opposition government has no one else to blame for the potential loss of its US refining subsidiary, Citgo, trustees told a US judge yesterday.

The Juan Guaido government's decision to wait until after defaulting on a nearly $1bn bond payment should not force trustees to rush to defend their rights, an attorney for debt trustees MUFG Union Bank and Glas Americas told the US District Court of the Southern District of New York.

"In short, the time constraints imposed by plaintiffs' choice to wait to bring this case until approximately one week ago cannot justify depriving defendants of a full and fair opportunity to litigate this case," attorney Luke Sobota wrote.

The banks sought six months to prepare their case, moving a decision to well after the expiration of a [federal prohibition](https://www.argusmedia.com/en/news/2002257-us-blocks-bondholder-takeover-of-citgo) on the sale or transfer of any Venezuelan assets in the US.

The Guaido shadow administration sued last month to nullify $1.68bn in bonds that mature next year. It argues that the bond swap was invalid because the issuance was not approved by Venezuela's national assembly as required by its constitution.

That will not matter in the US case, the trustees responded yesterday. New York, not Venezuelan, law governed the bonds tied to a national oil company PdV debt issuance known as PdV 2020. The trustees would show that Venezuela repeatedly issued debt without national assembly approval. The debt was handled by a Venezuelan government universally recognized as controlling the country at the time. And there could be no valid reason for the opposition to have waited so long to object to the bonds, since their complaint described being aware for years of the problems they claimed with the debt.

"Instead, as one adviser to the Guaido administration has conceded, plaintiffs decided not to commence litigation when PdV made the most recent interest in April 2019 because they believed it was to their advantage to wait," the trustees said, citing a tweet by Harvard professor and Guaido adviser Ricardo Hausmann.

Most western governments no longer recognize President Nicolas Maduro as the legitimate leader of Venezuela. The US recognized national assembly leader Guaido and imposed sanctions last January aimed at forcing Maduro out of office. But Maduro remains in control of most all Venezuelan institutions, while the Guaido government has appointed parallel boards for national oil company PdV and controls Citgo.

Maduro had been honoring a controversial swap that extended debt previously due in 2016 by pledging shares of Citgo as collateral. But Maduro did not make a $72mn interest payment last May. The Guaido government made that payment to prevent a default, tapping Citgo funds that the US froze.

Venezuela's debt holders are jostling for position for the country's most valuable assets in the reach of US courts. Both traditional bondholders and recipients of international arbitration awards for assets that the country nationalized over the past 15 years have vied for Citgo's 750,000 b/d of complex US Gulf coast and midcontinent refining capacity. Former Canadian miner Crystallex, now controlled by US hedge fund Tenor Capital Management, has [pursued shares](https://www.argusmedia.com/en/news/1986797-court-may-resume-citgo-sale-preparations

) of Citgo to satisfy a $1.4bn arbitration award. Another US court last week confirmed Owens-Illinois European Group's $400mn arbitration award and rejected an opposition government request for a 120-day stay in the case.