Adds details of parallel PdV board moves.
Speciality products refiner Nynas has outlined what its reorganisation could entail, including likely outcomes such as a sale of all or part of its business.
Sweden's Nynas is a 50:50 joint venture between Finland's Neste Oil and Venezuela's state-owned PdV. Nynas warned earlier this week that payments will be limited for at least a week, while offering to issue a security of up to 1mn kronor ($106,400) where cash is not available, to cover deliveries on 13-23 December. This facility has now gone up to SKr2.5mn and will be extended until 8 January 2020.
As a result of US oil and financial sanctions on Caracas, Nynas has been forced to purchase crude outside Venezuela, which has created considerable technical difficulties, reducing its bitumen output and increasing its purchase prices.
Following the initial petition on 13 December, the administrators have given Nynas a preliminary three months to analyse if and how Nynas' operations can continue, wholly or in part.
Banks have also been hesitant about transactions involving Nynas thanks to compliance risks and exposure to secondary transactions, while Nynas has not been able to borrow more funds.
Nynas has from April 2016 a five-year syndicated credit facility from six banks, which is the company's main source of financing. But the banks, five of which are Swedish, have been unwilling to continue financing Nynas, even less so since stricter US sanctions came into force in October.
The notice gives the main reason for the financial woes as being the sanctions against PdV, which have drastically reduced Nynas' profitability and led to it not being able to fulfill obligations to banks and suppliers, while the grace period granted to Nynas by its largest creditors has now lapsed.
A company reorganisation under Swedish law normally entails liabilities incurred before the notice being written off, but this is not the case in the current reorganisation, with the intention that all suppliers will be fully paid, although any composition will only cover a small portion of Nynas' creditors.
Nynas, with its administrators, is considering options including divestment of some of the business, improving the profitability of production using non-Venezuelan crude and improving the profitability of the Harburg refinery. The "considerable value in the inventory and real assets" owned by Nynas can be disposed of to raise liquidity. Nynas will draw up a more detailed plan for its next meeting with creditors on 24 January.
In addition Nynas is looking to get out of the US sanctions and will liaise with Swedish and US authorities to this end.
In a note issued yesterday, an "ad hoc" parallel PdV board run by Venezuela's US and EU-recognized interim government said it would continue monitoring the "unilateral" reorganization decision by Nynas caused by problems that it blamed on the Venezuelan government of President Nicolas Maduro. The group pledged to insist on "exercising its contractual and legal rights, with the goal of preserving the value of the company to the benefit of the Venezuelan people." The board currently has administrative control of PdV's US refining subsidiary Citgo, but PdV itself remains under Maduro's control in Caracas. No other overseas assets, including Nynas, have fallen into opposition hands.
Nynas operates four refineries in Europe, at Nynashamn and Gothenburg in Sweden, Harburg in Germany and Eastham in the UK in a joint venture with Shell. The company produces bitumen, base oils and other speciality lubricants.
By Jonathan Weston and Patricia Garip
