The US federal court in Delaware should launch the sale of US refiner Citgo’s parent company in September to take advantage of the rebounding profits in the refining industry, a court official tasked with the auction said.
By Argus Media – Haik Gugarats
May 01, 2023
The US District Court for the District of Delaware has already approved the sale of Citgo parent PdV Holding (PdVH) in a bid to generate at least $2.3bn, to satisfy Venezuela’s creditors. The amount reflects $970mn in Caracas’ remaining debts to defunct mining firm Crystallex, now owned by New York hedge fund Tenor Capital, and $1.3bn that Venezuela owes to ConocoPhillips. Venezuelan state-owned PdV is nominally still the owner of Citgo.
The court-appointed official in charge of the auction, Robert Pincus, urged the court on 28 April to begin the sale process on 5 September and aim to complete it by 1 June 2024. Pincus cited analysis from investment management firm Evercore that the rebound in profits in the US refining industry means that “the proposed sale of the PdVH shares in the near term may be more positively received by the market and could draw more potential bidders” than it would in prior years.
Citgo’s size and healthy finances makes it a good potential target for acquisition, according to the Evercore analysis.
Citgo, with 770,000 b/d in capacity at three US refineries, in March reported $2.8bn in profit for 2022 and said its cash reserves exceeded short-term liabilities by $2.6bn as of end-2022.
The company since 2019 operated under direction of the board appointed by the Venezuelan opposition and vetted by the US government. New management has ended the practice of using Citgo’s parent shares as collateral for raising money for Caracas. But old obligations remain, and a slew of US-based creditors of PdV and the Venezuelan government have eyed a sale of Citgo as an opportunity to press their claims.
Separate US court proceedings involve holders of $3.4bn in PdV 2020 bonds guaranteed by 50.1pc in Citgo Holding — a PdVH-owned legal entity that directly owns Citgo. ConocoPhillips has been cleared to enforce a separate $8.5bn international arbitration award related to a 2007 expropriation of the US producer’s Venezuela assets.
Some complications
The biggest hurdle in the Citgo sale process is a prohibition imposed by the US government in 2019 on the sale of Venezuelan assets. The Treasury Department today issued guidance reassuring potential bidders for Citgo that the US government will not get in the way of the auction process, even if approval for completing the sale is not guaranteed.
The Treasury guidance allows debt negotiations with the members of the Venezuelan National Assembly that sat between 2016-21 — the roughly 100 opposition members of that body are held by Washington to be the only legitimate institution in Venezuela. From the US government’s perspective, President Nicolas Maduro’s government and Venezuela’s current National Assembly has no claim to the US-based assets of the country, including Citgo.
Treasury in its guidance says it will be favorably inclined toward issuing a final clearance of the sale. But it adds the caveat that the authorization for the sale process remains conditional on US foreign policy and national security interests and may be revoked or modified at any time.
Citgo declined to comment. The company and its board previously told the Delaware court that the US government prohibition on the sale of Venezuelan assets should prevent holding an auction. But the court’s decisions disagree with that view.
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