Venezuelan opposition on brink of losing Citgo
Citgo, the most potent symbol of the US-backed Venezuelan opposition's governing aspirations, is slipping closer to a watershed bond foreclosure.
The US refiner is a subsidiary of Venezuela's national oil company PdV that is in default on a 2020 bond, fruit of a controversial 2016 swap issuance. Although Venezuela and PdV have at least $150bn in unpaid debts around the world, this particular bond stands out for its collateral: 50.1pc of the shares in Delaware-based Citgo Holding.
The closely watched 2020 8.5pc interest bond matures on 27 October, and bondholders that include prominent institutional investors such as Ashmore, Fidelity and T Rowe Price are owed around $1.8bn-$1.9bn on that date.
The mainstream opponents of Venezuelan president Nicolas Maduro's government have controlled Citgo since early 2019, after the US imposed oil sanctions to try to oust him in favor of National Assembly speaker Juan Guaido. Although Guaido's US-supported parallel administration made a May 2019 coupon payment of $72mn, it sued to invalidate the bonds instead of making a subsequent $914mn payment of principal and interest last October. The lawsuit coincided with a US Treasury block against bondholders exercising their right to Citgo as collateral.
Guaido's representatives argue that a New York federal court should invalidate the bond because it was never approved by the National Assembly in Caracas.
The argument has gained no traction, partly because it would set a precedent for other foreign issuers to walk away from their US obligations based on political changes at home, debt experts say.
This is why a pending US government opinion ahead of the next New York court hearing on 25 September is unlikely to transmit more than nominal support for keeping Citgo in the Venezuelan opposition's hands.
Bondholders blocked
For now, the bondholders remain blocked from enforcing the lien on Citgo by the ongoing suspension of General License 5, a provision of US sanctions that freed them to act on the bond conditions.
The suspension has been rolled over every 90 days since it was first issued in October 2019, and it is next due to lapse on 20 October, the eve of the bond maturity — as well as the pivotal 3 November US elections in which Donald Trump is seeking another four-year term.
The Venezuelan cause is a key Trump campaign theme because of its perceived appeal to a subset of Latino voters in the swing state of Florida. As a result, the US Treasury Department's Office of Foreign Assets Control (Ofac), the agency that administers sanctions, seems likely to renew the suspension for another three months rather than expose the mainstream Venezuelan opposition to another embarrassing defeat. That brings the next expiry right up to the January presidential inauguration — either of Trump or his rival Joe Biden. By then, Venezuela will have lost its campaign value, making it easier for the US to let the bondholders foreclose on Citgo.
Whether this happens in October or January, the judicial die seems to have been cast in favor of the bondholders rather than Crystallex, the former Canadian mining company now controlled by New York hedge fund Tenor Capital Management that is challenging Venezuela in a parallel Delaware federal court case.
Crystallex is pressing to take over Citgo Holding's parent PdV Holding as compensation for the seizure of its Venezuelan gold mining assets a decade ago. A win for Crystallex, based on an alter ego argument that Citgo is a stand-in for the Republic of Venezuela, would still require an Ofac license to execute. The bondholders' case, which is based on an explicit pledge, is more straightforward than the claim of Crystallex, or others such as ConocoPhillips seeking Citgo shares to satisfy international arbitration awards against Venezuela.
Sealed fate
The loss of Citgo could hasten the disintegration of the Venezuelan opposition, which is already sharply divided over whether to participate in 6 December National Assembly elections. This week another member of Guaido's team of exiled technocrats, parallel PdV board chair Luis Pacheco, made public his plan to step down after key court hearings over the next three weeks. He and other former Guaido associates have previously warned that Citgo is becoming harder to defend.
One last option for the opposition would be to enter Citgo's two parent companies into Chapter 11 bankruptcy. But the lengthy process would bear the same political price for Guaido of effectively losing an asset that he had pledged to protect. If he is pushed aside in the assembly elections as well, Maduro will have succeeded in crushing his main rival and surviving the sanctions that have kept Venezuelan oil out of the US market for close to two years.
Related news posts
Yemen’s Houthis attack ships in Red Sea, Mediterranean
Yemen’s Houthis attack ships in Red Sea, Mediterranean
Singapore, 16 July (Argus) — Yemen-based Houthi militants have launched three military operations in the Red Sea and the Mediterranean, Yemen's state-owned news agency Saba said on 15 July. The Houthis carried out multiple attacks against an Israel-owned oil product tanker in the Red Sea, according to US Central Command (Centcom) on 16 July. The Houthis used three surface vessels to attack the Panama-flagged and Monaco-operated Bentley I , which was carrying vegetable oil from Russia to China, Centcom said. There was no reported damage or injuries, Centcom said. Bentley I loaded 39,480t of sunflower oil at Russia's Taman port on 3 July, according to global trade analytics platform Kpler. The Houthis also separately attacked a Marshall Islands-owned, Greek-operated crude oil tanker Chios Lion with an uncrewed surface vessel (USV) in the Red Sea. The USV caused damage but the Chios Lion has not requested assistance and there have not been any reported injuries, Centcom said. The Houthis described its hit as "accurate and direct", according to Saba. The Chios Lion loaded 60,000t (387,000 bl) of high-sulphur straight-run fuel oil on 30 June and 30,000t of fuel oil on 18 June, both at Russia's Tuapse port, according to Kpler. It planned to unload these in China on 22 July. The Houthis have claimed responsibility for these two ship attacks, which were targeted "owing to violation ban decision of access to the ports of occupied Palestine by the company that owns the ship". The Houthis also claimed a third attack on the Olvia with the Iraqi Islamic Resistance in the Mediterranean, with this having "successfully achieved its objective". The Olvia loaded about 6,300t of very-low sulphur fuel oil at Israel's Haifa port on 12 July and was scheduled to unload this at Israel's Ashdod refinery on 13 July. Crude prices were largely lower at 04:00 GMT. The Ice front-month September Brent contract was at $84.63/bl, lower by 22¢/bl from its settlement on 15 July when the contract ended 18¢/bl lower. The Nymex front-month August crude contract was at $81.65/bl, down by 26¢/bl from its settlement on 15 July when the contract ended 30¢/bl lower. By Tng Yong Li Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Trump taps Vance as running mate for 2024
Trump taps Vance as running mate for 2024
Washington, 15 July (Argus) — Former president Donald Trump has selected US senator JD Vance (R-Ohio) as his vice presidential pick for his 2024 campaign, elevating a former venture capitalist and close ally to become his running mate in the election. Vance, 39, is best known for his bestselling memoir Hillbilly Elegy that documented his upbringing in Middletown, Ohio, and his Appalachian roots. In the run-up to the presidential elections in 2016, Vance said he was "a never Trump guy" and called Trump "reprehensible." But he has since become one of Trump's top supporters and adopted many of his policies on the economy and immigration. Vance voted against providing more military aid to Ukraine and pushed Europe to spend more on defense. Trump said he chose his running mate after "lengthy deliberation and thought," citing Vance's service in the military, his law degree and his business career, which included launching venture capital firm Narya in 2020. Vance will do "everything he can to help me MAKE AMERICA GREAT AGAIN," Trump said today in a social media post. Like Trump, Vance has pushed to increase domestic oil and gas production and criticized government support for electric vehicles. President Joe Biden's energy policies have been "at war" with workers in states that are struggling because of the importance of low-cost energy to manufacturing, Vance said last month in an interview with Fox News. Trump made the announcement about Vance on the first day of the Republican National Convention in Milwaukee, Wisconsin, and just two days after surviving an assassination attempt during a campaign event in Pennsylvania. Earlier today, federal district court judge Aileen Cannon threw out a felony indictment that alleged Trump had mishandled classified government documents after leaving office. By Chris Knight Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
France's Annecy Haute-Savoie airport will offer SAF
France's Annecy Haute-Savoie airport will offer SAF
London, 15 July (Argus) — Global airport operator Vinci Airports and TotalEnergies have partnered to provide sustainable aviation fuel (SAF) and electric charging stations at France's Annecy Haute-Savoie Mont-Blanc airport. TotalEnergies will supply SAF made from waste and residues such as used cooking oil (UCO) to be blended up to 35pc with conventional aviation fuel. It will also install an electric charging station for light aircraft with minimum power of 22 kW. The installation is expected to be completed by October. Vinci Airports first made SAF available to users of Clermont-Ferrand Auvergne airport in France in 2021. The SAF, produced from UCO, is supplied by Air BP under a refuelling contract with Vinci Airports. The company said five of its airports now offer biofuels. By Evelina Lungu Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Waning German products oversupply evens domestic prices
Waning German products oversupply evens domestic prices
Hamburg, 15 July (Argus) — Germany's recent refined products oversupply, particularly in the south, is waning because of higher demand and technical issues reducing availability. Price differences within the country are starting to level out. Availability of heating oil and road fuels at the Bayernoil consortium's 215,000 b/d Vohburg-Neustadt refinery in Bavaria is restricted. At least one of the refinery's stakeholders is restricting loadings of E5 and 98 Ron gasoline and will probably continue to do so until the end of July. Planned maintenance works on a reformer have reduced production. Diesel and heating oil availability for spot sale are also restricted. A unit outage is affecting the refinery's diesel throughput, and a damaged heating oil tank at Vohburg has restricted loading capabilities since June. Term contracts are unaffected. Demand has increased across the board because of lower domestic prices, after Ice gasoil futures dropped week-on-week. Traded heating oil volumes reported to Argus last week rose especially strongly, by 28pc, and fuel demand also went up. By Natalie Mueller Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
![](/_next/image?url=%2F-%2Fmedia%2Fproject%2Fargusmedia%2Fmainsite%2Fimages%2F14-generic-hero-banners%2Fherobanner_1600x530_generic-c.jpg%3Fh%3D530%26iar%3D0%26w%3D1600%26rev%3D-1%26hash%3DFC2BEDE406483FEF5FDB9549159BAC11&w=3840&q=75)
Business intelligence reports
Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.
Learn more