Court Paves Way for Sale of Venezuelan-Owned Refiner Citgo
As the U.S. military prepares for likely action in Venezuela, a judge in Delaware has approved the sale of Venezuelan-held Citgo Petroleum, bringing relief for creditors who lost billions when the Venezuelan government defaulted on debts.
The bid by Amber Energy, a division of hedge fund Elliott Investment Management, offers a total of $5.9 billion in cash and $2.9 billion in debt settlements for the sale of PDV Holding. PDV is the parent company of Citgo Petroleum, America's seventh-largest refiner. In turn, PDV is wholly owned by PDVSA, the Venezuelan state oil company; however, CITGO is US-domiciled, and its board is effectively controlled by Venezuela's political opposition.
Elliott's bid includes $2.1 billion for holders of Venezuelan-issued bonds. These bondholders lost billions when the Venezuelan government defaulted on its debts to foreign lenders; in 2017, a US court found that the oil company could be held liable for the government's debts. Creditors have been pursuing the company in court for losses totaling about $19 billion ever since.
Parties representing Venezuelan interests have tried procedural measures to prevent the ruling, including an effort to disqualify the presiding judge and court-ordered advisors, without success. The court determined a market value for PDV Holding and its assets of about $13 billion, less than Venezuela's preferred amount, and has now approved its sale to Elliott.
If authorized by the Treasury Office of Foreign Asset Control (OFAC), acquisition of PDV will hand Elliott three refineries, three lubricant plants, pipelines, terminals, and a gas station network stretching from Texas to Maine.
Citgo's current board was appointed by Venezuela's interim government and the 2015 Venezuelan National Assembly, not the current, de facto government of dictator Nicolas Maduro. In its mission statement, the firm says that its mission is to support "CITGO's ultimate shareholder, the Venezuelan nation" and operate "safely, efficiently and profitably for Venezuela's future." The future of that mission under new management (if the court-approved deal is consummated) appears uncertain.
In its bid, Elliott reportedly told the court that it plans to overhaul Citgo's management and focus on cost-cutting. A competing bid from Canadian-backed Dalinar Energy - which was not selected - had proposed to leave current management in place, according to previous reporting by Reuters.
Top image: Citgo's Lamont refinery (Michael Kappel / CC BY)