Venezuela pursues debt settlement with Crystallex, Conoco, bondholders

(C) Reuters. FILE PHOTO-The logo of PDVSA’s U.S. unit Citgo Petroleum is seen at a gas station in Stowell, Texas, U.S., June 12, 2018. REUTERS/Jonathan Bachman

By Marianna Parraga

HOUSTON (Reuters) – Negotiators representing Venezuela have held settlement talks with bondholders and creditors owed billions of dollars from defaults and expropriation claims, the head of a board supervising the country’s foreign oil assets told Reuters.

The talks have gained urgency as a federal court judge is to decide next month whether to kick off an auction of shares that could lead to the break-up of Citgo Petroleum, Venezuela’s most prominent overseas asset. The U.S. has for years shielded Citgo from seizure under a license that will expire next month if not renewed.

Some $2.6 billion in court-approved claims from Crystallex International, ConocoPhillips (NYSE:COP), Siemens Energy and Red Tree Investments could be applied to auction proceeds.

Holders of a defaulted PDVSA bond backed by a 50.1%-interest in one of Citgo’s parents separately claiming hundreds of millions of dollars in a New York court case.

“We have progressed with the bondholders and Crystallex since party representatives officially met for the first time late last year and in February, respectively. Offers and counter offers have been presented,” Horacio Medina, the head of the ad-hoc board that supervises PDVSA’s foreign subsidiaries, told Reuters.

IN ‘GOOD FAITH’

A negotiation team representing Venezuela also has held talks with ConocoPhillips, but they have not swapped financial proposals, he said.

“Parties have shown good faith and willingness. We hope we can initiate the negotiation phase with them soon,” Medina said of the Conoco discussions.

Talks with Siemens Energy and Red Tree Investments, the other two creditors in the Delaware case, have not begun.

Conoco, which is seeking to collect $1.3 billion from one of the arbitration rulings linked to the expropriation of its oil projects in Venezuela, declined to comment. But Chief Executive Ryan Lance said in May that he saw “light at the end of the tunnel” for claims from the 2007 takeover of its Venezuelan assets.

A Crystallex representative declined immediate comment. Citgo did not reply to a request for comment.

An attorney for the bondholders did not immediately reply to requests for comment. The bondholders on Wednesday appealed to a federal court in New York to preserve their collateral in event the Citgo Holding share auction went ahead without including their claims.

RACE AGAINST THE CLOCK

The U.S. District Court judge overseeing the Crystallex lawsuit this week said he plans to start regular meetings next month with a court officer who has organized an auction schedule, a sign the process could begin as soon as September.

It is unclear how that judge would view any out-of-court agreements after allowing what began a single claim by Crystallex to be broaden to include other creditors conditionally attaching their claims to the case.

Venezuela is hoping Washington will renew the license that protects Citgo from creditors past its July 19 expiration as a way to encourage payment negotiations to be completed. The U.S. Treasury has given approval for the auction, but said individual companies would have to obtain a license to take possession of any assets.

Citgo’s fortunes have risen sharply in the last two years. It posted a $937 million profit for the first quarter this year, and a $2.8 billion profit for 2022. Last year, it reduce debt by $1.1 billion and by $473 million so far this year.

Venezuela-related expropriation claims at U.S. courts pursuing Citgo’s assets surpass $20 billion, while the company’s 769,000-barrel-per day refining network and other assets have been valuated at about $13 billion.