July 24, 2023 [Reuters] – The U.S. Treasury Department on Wednesday renewed a license that protects Venezuela-owned refiner Citgo Petroleum from creditors seeking to seize the company’s assets to recoup claims against the country’s state oil firm.
The renewal would allow the supervisory board that oversees Citgo to continue efforts to reach settlements with nearly a dozen firms seeking an auction of shares in the parent of the seventh-largest U.S. oil refiner.
A negotiating team representing the South American country has held settlement talks with some of those creditors and holders of defaulted PDVSA bonds.
The U.S. has shielded Houston-based Citgo from creditors since the company in 2019 severed ties with its ultimate parent, Venezuela’s state oil firm Petroleos de Venezuela, which is controlled by President Nicolas Maduro.
Wednesday’s Treasury license bars transactions in PDVSA debt through Oct. 19.
Horacio Medina, chief of the board that supervises Citgo, did not immediately reply to a request for comment. Citgo declined to comment.
A sales process for Citgo shares that could begin as soon as September is under consideration by a U.S. judge in Delaware. The proposed auction could be used to satisfy some $2.7 billion in claims for expropriation of Venezuelan assets and judgments from Crystallex International, ConocoPhillips (COP.N), Siemens Energy (ENR1n.DE) and Red Tree Investments.
Six other companies also have attachments contingent on obtaining U.S. Treasury approval to seize assets. Their judgments total $3.46 billion. The six companies are: O-I Glass (OI.N), Huntington Ingalls Industries (HII.N), ACL1 Investments, Rusoro Mining (RML.V), Gold Reserve (GRZ.V) and two Koch Industries units.
Citgo last year posted a record $2.8 billion annual profit, and a $937 million profit in the first quarter, giving it room to negotiate payments with some creditors, which in total are claiming more than $20 billion.
Holders of PDVSA’s defaulted 2020 bonds, which are backed by a 50.1% stake in a Citgo parent, in 2020 won a court judgment allowing them to collect $1.9 billion in defaulted principal and interest payments. The group is asking a New York court to authorize the use of the company’s U.S. oil pipeline and refining assets to help settle debt restructuring negotiations.
If PDVSA loses an appeal challenging the bonds’ validity, U.S. District Judge Katherine Polk Failla in Manhattan could release a hold on that case. Venezuela this month lost a separate appeal trying to block new creditors from attaching to the Delaware case.
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