Venezuela pays miner $425 million in move to safeguard Citgo

Bloomberg | 27 November 2018

Venezuela pays miner $425 million in move to safeguard Citgo

Venezuela made an partial payment of a settlement designed to resolve a $1.2 billion arbitration award to a bankrupt Canadian gold miner that’s laying claim to the assets of the parent of refiner Citgo Holding Inc. if it’s not paid in full.

Crystallex International Corp. received $425 million in November, and will suspend all enforcement efforts until at least early next year, according to Canadian court documents. Venezuela is now required to pay the remaining balance in installments by early 2021, and deliver an “acceptable security interest” or collateral to ensure payments its outstanding obligations, according to the documents.

The payment helps Venezuela’s state-run oil company PDVSA hold onto Citgo Holding Inc. for the time being, even as the line of creditors that could lay their hands on the U.S. refiner grows. The socialist nation, mired in a massive economic crisis exacerbated by the collapse of its all-important oil industry, counts on Citgo’s refineries to handle Venezuelan crude that brings in desperately needed hard currency.

Crystallex has been paid in cash and liquid securities on deposit in a Canadian bank, according to an emailed statement from Crystallex Chief Executive Officer Bob Fung. The original settlement of lawsuits filed in federal court in Delaware seeking to seize assets tied to Houston-based Citgo was reached in September.

"We expect Venezuela to post collateral to secure the remaining payment it owes to Crystallex by Jan. 10th,” Fung said. "If it fails to do so, Crystallex will proceed with its action executing on PDVSA’s shares in the parent company of Citgo."
Appeals Court

In October, a U.S. appeals court denied a bid to halt the sale of Citgo, helping clear the way for an auction for control of the refiner, worth as much as $8 billion. Last week, the same court temporarily stayed the case until Jan. 10 to work out final details of the settlement, according to court filings.

“While Crystallex is hopeful that the settlement will come to fruition, if the required steps to fully implement the amended settlement do not take place” the mining company will go back to court to seize assets linked to Citgo, the company’s lawyers said in the filing.

Aside from Crystallex, those vying for Citgo’s assets now include:

  • Russia (as collateral for loans from state-run Rosneft)
  • U.S. oil giant ConocoPhillips (which won international arbitration case against Venezuela)
  • Citgo’s own bondholders (as collateral on debt)
  • PDVSA 2020 bondholders who were paid last month

The case is Crystallex International Corp. v. Bolivarian Republic of Venezuela, 17-mc-00151, U.S. District Court, District of Delaware (Wilmington).

source: Bloomberg