Court Auction of Venezuela’s CITGO Tallies 18 Creditors, 21.3 Billion Debt
Caracas, January 29, 2024 (venezuelanalysis.com) – A Delaware judge has approved claims from 18 corporations for an ongoing court-mandated sale of shares belonging to PDV Holding (PDVH), the parent company of Venezuela’s US-based refiner CITGO.
Altana Credit Opportunities Fund was cleared on Wednesday to seek compensation for a $530 million debt owed by Venezuela through the present auction.
Altana joined a list of 17 other approved creditors, with total liabilities adding up to $21.3 billion. CITGO, presently valued at around $13 billion, has been targeted for compensation by firms that secured international arbitration awards against Venezuela or hold defaulted bonds. CITGO has been under the control of the US-backed Venezuelan opposition for the past five years.
An “alter ego” ruling, first secured by Crystallex in 2019 and repeatedly upheld by US courts, determined that the Venezuelan state and state oil company PDVSA were one and the same, thus making the latter, and its subsidiaries such as CITGO, liable for the former’s debts.
In March 2023, Delaware Judge Leonard Stark pointed to the Juan Guaidó-led “interim government”’s handling of financial affairs to justify the alter ego decision. The ruling was later confirmed by the Third Circuit Court of Appeals and paved the way for several claimants to join the process. The Supreme Court refused to entertain an appeal earlier this month.
After years of litigation, Stark set the share auction in motion in October 2022, with procedures officially beginning one year later. He ruled out a “stalking horse” bid which would have established a minimum value for PDVH/CITGO and set a mid-2024 deadline to conclude the sale. A first round of confidential bids concluded on January 22.
Oilprice.com reported that dozens of enterprises have expressed interest in the ongoing auction and requested data from Evercore, an investment bank hired by the court as a marketing consultant. “Special Master” Robert Pincus, who is conducting the sale, has argued that CITGO will draw higher offers if sold as a whole.
The auction process will satisfy creditor claims on a “first come, first serve basis,” based on when corporations had their writs approved. Crystallex ($1.0 billion), TIdewater ($80 million), ConocoPhillips ($1.4 billion) and O-I Glass ($700 million) stand at the top of the list.
ConocoPhillips is looking to collect on a separate $8.5 billion award from the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) which has accrued a further $1.7 billion in interest.
In December, Stark threw out a motion seeking to keep the energy multinational from attaching its claim to the PDVH auction.
Venezuela is still pursuing an appeal at the international tribunal. However, the US oil giant secured a default victory to enforce the award after lawyers representing the Guaidó “interim administration” failed to appear in court.
The hardline politician secured control of US-based assets and assumed legal representation in US courts after being “recognized” by the Trump administration in early 2019. Together with his associates, Guaidó has drawn accusations of malpractice and collusion for endangering CITGO.
The present company board, which formally answers to a defunct, US-backed parliament, has attempted to negotiate settlements with Crystallex and other claimants. Nevertheless, other firms have filed legal motions to prevent eventual agreements from deterring the auction.
Apart from arbitration award creditors, CITGO is likewise liable to holders of the defaulted PDVSA 2020 bond, for which 50.1 percent of company shares were pledged as collateral. Successive US Treasury bans on transactions involving the debt instrument have stopped bondholders from collecting around $1.9 billion. They will be able to move forward once the court-ordered sale concludes and CITGO’s ownership changes.
For its part, the Nicolás Maduro government has denounced the “theft” of Venezuela’s most prized foreign asset. It pledged to pursue “political, diplomatic and judicial” actions to avoid losing the refiner.
With three refineries and a network of more than four thousand gas stations, CITGO used to deliver as much as $1 billion in yearly dividends to the Caribbean nation before the US levied wide-reaching sanctions and the opposition took control.
