Venezuela must sell its crown jewel beursduivel.be

Venezuela is entering the final stages of a long legal battle in which its most valuable foreign asset, Citgo Petroleum, will be sold at auction to settle claims against the government and the oil company. The bidding process is expected to take several months. what is going on?

Citgo was protected by US sanctions imposed on Venezuela, which prevented creditors from seizing the refinery. But a US judge ordered the sale of the parent company, PDV Holding Inc, to begin so creditors could be compensated. It becomes four questions He replied.

Why should Venezuela sell Citgo?

The sharp decline in oil prices and strict US sanctions caused the collapse of the country’s oil exports, which are responsible for more than 90% of its revenues, due to mismanagement, corruption and restrictions on international trade. Citgo has been waging a battle between two political parties since 2019, after the US government recognized Juan Guaido as the legitimate president of the country and not Maduro. The Venezuelan opposition currently controls the refinery.

Venezuela’s creditors – a diverse group with a mix of arbitration awards, unpaid loans and delinquent bonds – are demanding compensation and count Citgo among its most valuable assets. Crystallex International is the lead creditor. Now the path to achieving this is clear. More than 20 plaintiffs have filed claims totaling about $20 billion. They must prove that Venezuela owes them money, and most creditors must still follow all the necessary steps to do so.

How much is Citgo worth?

Citgo’s value has risen in recent years thanks to rising oil prices. Experts estimate the company’s value at between $8.1 billion and $23.5 billion. Citgo said it could use $3 billion in cash to settle the claims. According to these assessments, the sale of shares would be sufficient to at least satisfy direct creditors. But Venezuela has about $160 billion in outstanding debt, including bonds, loans and arbitration awards.

Who are the potential buyers?

The Citgo could be attractive to many potential buyers. It owns three refineries and 38 wholly owned or jointly owned stations, in addition to a network of about 4,200 gas stations. Analyst Alan Gelder of consultancy Wood Mackenzie said the assets were profitable last year and highly competitive in North America. Due to the sanctions, any transfer of shares requires authorization from the US Treasury. The buyer must also be vetted by the government.

According to Jorge Piedrahita, CEO of Gear Capital Partners in New York, the acquisition could be interesting to buyers looking to expand their business or as a financial investment. He advises companies such as Marathon Petroleum and Valero Energy, while private equity funds could be interested because of Citgo’s competitiveness and ability to generate cash.

Independent refiners may also be interested. A round of consolidation is currently underway in the oil and gas sector. Recently, ExxonMobil (with Pioneer) and Chevron (with Hess) made billion-dollar acquisitions. It is not known whether Shell also has ambitions in these merger efforts. ExxonMobil is one of Citgo’s major creditors.

What is the timeline for the sale?

The traditional bidding process will be in two rounds, which is common in mergers and acquisitions. This was chosen in an attempt to increase competition among potential bidders. Creditors must complete a number of steps before January 12 to qualify for the bidding, and the first round of bidding is scheduled to take place on January 22. The second has not yet been determined. The final hearing to approve the sale is scheduled for July 15. Ongoing litigation can delay the process.

Last week, the US government decided to suspend a number of sanctions imposed on Venezuela. The US Treasury also extended protections against Citgo, preventing holders of PDVSA 2020 bonds from seizing shares of the refinery’s parent company until after January 2024. But because the US still does not recognize Maduro as the legitimate ruler of Venezuela, the company remains under opposition control.

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