Third Circuit Rejects Citgo Rehearing

(Argus, Elliott Blackburn, 21.Nov.2019) — Federal appeals court judges have denied Venezuela’s request to rehear a July decision upholding the pursuit of the country’s US refining subsidiary Citgo to satisfy billions of dollars of debts.

The US Third Circuit Court of Appeals denied a request to hear arguments on the case in front of a full panel of judges. A three-judge panel affirmed in July that creditors and entities seeking compensation for expropriations could pursue shares of the refiner’s controlling company in the US.

Attorneys for Venezuela’s opposition leaders, which represent Venezuela in US courts, could not be immediately reached for comment. But those leaders separately received other protections from the US Treasury Department, which clarified that any settlement agreements or the enforcement of liens and judgments transferring Venezuelan property in the US would be blocked unless specifically licensed by the Office of Foreign Assets Control.

Citgo’s 750,000 b/d of complex US refining capacity and associated pipelines and terminals have offered the most lucrative target for Venezuelan creditors seeking more than $150bn. More than a dozen companies, bondholders and other entities have filed to have their debts, including arbitration awards for expropriated assets, recognized in US courts.

Such recognition allows the parties to pursue a trail carved by former Canadian mining firm Crystallex, now controlled by investment firm Tenor. Crystallex successfully argued that Citgo and its controlling holding companies represented an alter ego of Venezuela and its national oil company, PdV. The decision meant that Citgo could be attached to satisfy those debts.

US foreign policy over the past year has complicated those efforts. The US and most western governments recognize National Assembly leader Juan Guaido as Venezuela’s interim president, issuing sanctions in January to cripple the country’s oil company and loosen the grip of president Nicolas Maduro. But Maduro has held firm to most of the country’s institutions, leaving US-based Citgo the only clear demonstration of Guaido control.

The Guaido government have recently entered the US court system as plaintiffs, seeking to overturn debt the opposition-controlled National Assembly says was taken on illegally. The Guaido government and the bondholders agreed to a forbearance last week that pauses execution of their claim to Citgo, with arguments over the debt scheduled in a US court for next spring.

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