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Venezuela settles $1.2 billion creditor claim to protect Citgo

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Venezuela settles $1.2 billion creditor claim to protect Citgo
FILE PHOTO: PDVSA's U.S. unit Citgo Petroleum refinery is pictured in Sulphur, Louisiana, U.S., June 12, 2018. REUTERS/Jonathan Bachman/File Photo   -   Copyright  Jonathan Bachman(Reuters)
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By Tom Hals

(Reuters) – Cash-strapped Venezuela settled a $1.2 billion (£936.5 million) arbitration claim that will protect its crown jewel foreign asset, the Houston-based Citgo Petroleum Corp refining business, from being stripped away by a creditor, according to Canadian court documents.

The deal with Crystallex International Corp suspends the Canadian mining company’s push for a court-ordered auction of control of Citgo as a way of collecting on an arbitration award against Venezuela that has grown to more than $1.4 billion with interest.

Venezuela completed an initial payment of $425 million, mostly in the form of “liquid securities,” on Nov. 23, according to a filing in the Ontario Court of Justice, where Crystallex has been operating since 2011 under protection from creditors.

Venezuela agreed to pay the remainder in instalments by early 2021. If Venezuela fails to post by Jan. 10 collateral for the remaining payments, Crystallex can restart legal proceedings.

A U.S. judge in Delaware was to hear arguments on Dec. 20 for auctioning Citgo out from under its ultimate parent, PDVSA, Venezuela’s state oil company. Citgo operates three U.S. refineries that are a key destination for the Venezuela’s crude exports, and the company has been valued in the billions of dollars.

While Venezuela has been crippled by an economic crisis and U.S. sanctions, and has halted payments on tens of billions of dollars of debt, it has focussed on retaining control of Citgo. Caracas made payments last month to investors who hold bonds secured by shares of Citgo.

Crystallex and Venezuela reached an agreement last year, but Caracas failed to maintain its payments after transferring $75 million.

Venezuela expropriated a Crystallex gold mining project in 2011, which led to the 2016 arbitration award.

As Venezuela’s debt defaults have piled up and U.S. sanctions have isolated the country, creditors have begun to close in on overseas assets of PDVSA as a source of recovery.

ConocoPhillips said in October it had received $345 million in cash and commodities in the third quarter from PDVSA as part of a four-year deal to settle a $2 billion arbitration award.

Conoco has been pursuing compensation from Venezuela after it was kicked out of the country during a 2007 nationalisation drive.

Rusoro Mining Ltd reached a settlement with Venezuela in October, five months after the Canadian mining company filed U.S. court papers to pursue Citgo to collect on an arbitration award worth $1.3 billion stemming from an expropriated gold mine.

(Reporting by Tom Hals in Wilmington, Delaware; Editing by David Gregorio)

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