Venezuela Rejects Auction That Could Lead to Citgo Breakup

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(Reuters, 15.Aug.2023) — Negotiators and officials representing Venezuela are opposing a court-ordered auction of shares in a parent of oil refiner Citgo Petroleum to pay creditors claiming more than $10 billion from expropriations and debt defaults.

Some 20 creditors with arbitration awards or lawsuits against Venezuela and its state oil company PDVSA on Monday asked a federal court in Delaware to register their cases so they can participate in the October-scheduled auction. The auction puts priority on when claims were filed.

Including interest and fees, the collective claims of companies including Crystallex International, ConocoPhillips (COP.N), Tenaris SA (TENR.MI) and Exxon Mobil (XOM.N) could exceed the market value of Citgo, the Venezuela-owned U.S. refiner, which has recently been put at between $10 billion and $13 billion.

The boards that supervise Citgo since the company severed ties with its ultimate parent, Caracas-headquartered PDVSA, have unsuccessfully sought to negotiate payments with some of the larger creditors since last year.

“This is pointless, it is an unmanageable process,” Horacio Medina, the head of the board that supervises Citgo, said of the court’s decision to open the auction to all claimants. “What is the point … To show that Venezuela owes $150 billion and cannot pay everyone? Why then to auction off an asset that would make it possible to negotiate additional payments?”

The team representing Venezuela in the Delaware proceedings has been “very limited” in its effort negotiate payments, especially since the U.S. Treasury Department in March approved the court-organized auction.

Spokespeople for Citgo, the U.S. Departments of Treasury and Justice declined to comment.

U.S. Senator Bob Menendez has said he will introduce a bill that would add Venezuela to the jurisdiction of the Department of Justice’s Foreign Claims Settlement Commission. The move would ensure “an orderly process of adjudication for legal claims of U.S. nationals against the Venezuelan government,” according to his office.

That process could provide a fairer way to resolve the creditors’ claims. But it could arrive too late for stopping the auction in Delaware, Medina said.

Menendez’s office did not immediately reply to a request for comment.

Venezuelan President Nicolas Maduro, who has repeatedly criticized the upcoming auction, on Monday rejected the way Citgo is being managed, adding the company “has been kidnapped by the United States.”

“They are simply stealing a company that is worth $12 billion and that belongs to Venezuelans,” he said late on Monday in a broadcast event.

Venezuela’s National Assembly in May formally rejected the U.S. Treasury’s approval of the auction.

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Reporting by Marianna Parraga in Houston and Vivian Sequera in Caracas; Editing by Gary McWilliams and Matthew Lewis

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