US fends off bondholder takeover of Citgo

The US administration will continue to shield Venezuelan state-owned PdV's US refining subsidiary Citgo from being taken over by holders of PdV 2020 bonds for another three months.

The holders of the PdV 2020 bond in theory can lay a claim to 50.1pc of shares in Citgo's holding company, but the US Treasury Department's sanctions enforcement arm, the Office of Foreign Assets Control (OFAC), began issuing general licenses in 2019 that prevent the bondholders from enforcing their claim. Another license issued by OFAC today extends the protection until 20 April 2023. The previous license was issued for a one-year period, due to end on 20 January.

The PdV 2020 bondholders are one of many creditors of PdV and the Venezuelan government with a potential claim to Citgo, nearly all of them pursuing action in US courts to satisfy their claims by putting the refining company on the block.

The most advanced of those cases is moving through the US District Court for the District of of Delaware, which has approved a plan to put Citgo's holding companies PDV Holding and Citgo Holding on the auction block. The sale is aiming to generate at least enough to satisfy a $969mn claim by a Canadian mining firm now controlled by New York-based financial services firm Tenor Capital Management and a $1.29bn claim by US independent producer ConocoPhillips.

The competing claims between PdV 2020 bondholders and other creditors would inevitably clash in US courts. The US government until now has prevented that legal fight by blocking the sale of Citgo, citing its potential negative effects on the fortunes of an alternative government led by Juan Guaido, Venezuela's opposition leader whom the US previously recognized as the country's interim leader.

But the Venezuelan parliament that Guaido used to head has ousted him as interim president and dissolved his government.

Citgo is administered by an ad hoc board appointed by the members of the country's National Assembly, whose term expired in January 2021. It is not clear whether the Citgo ad hoc board and its members' claim to administer the company can survive the internal Venezuelan power struggle. Guaido's US envoy, Carlos Vecchio, stepped down on 5 January, shutting down the Washington-based Venezuelan embassy.

Citgo declined to comment on its board members' current credentials.

The US administration says it will back whatever arrangements the 2016-2021 Venezuelan National Assembly makes for administering Citgo and Venezuela's other foreign assets.

By Haik Gugarats