Judge declares Venezuelan bonds valid, creditors press for Citgo auction resolution

By Luc Cohen and Marianna Parraga

NEW YORK/HOUSTON (Reuters) – A U.S. decide upheld the validity of Venezuelan state oil firm PDVSA’s 2020 bonds on Thursday, prompting a decide in one other court docket to maneuver in direction of the completion of an public sale of shares within the mother or father of Venezuela-owned U.S. refiner Citgo Petroleum.

The bonds are secured by a majority stake in Citgo, which is finally owned by Caracas-headquartered PDVSA. The state oil firm defaulted on the bonds in 2019, placing the Houston-based refiner susceptible to seizure by collectors.

For years, bondholders and corporations expropriated in Venezuela have clashed in U.S. courts in pursuit of the nation’s abroad belongings, particularly its crown jewel Citgo, after profitable arbitration circumstances.

After Washington sanctioned PDVSA in 2019 as a part of its push to oust Venezuelan President Nicolas Maduro, Citgo severed ties with PDVSA and the refiner’s management was taken over by Venezuela’s political opposition by way of supervising boards.

The opposition has been attempting to guard Citgo and different belongings from collectors in search of redress for defaulted debt or expropriated belongings. The opposition had argued that the 2020 bonds weren’t correctly issued underneath Venezuelan regulation.

On Thursday, U.S. District Decide Katherine Polk Failla in Manhattan dominated that the bonds had been certainly correctly issued. She had declared the bonds legitimate in 2020, however an appeals court docket later ordered additional overview.

“Right this moment’s resolution is as unhealthy because the earlier one, and we are going to attraction it. We now have loads of grounds for that,” mentioned Horacio Medina, head of a board supervising Citgo.

After Failla’s ruling, the ultimate listening to of a separate public sale of shares in Citgo’s mother or father earlier than U.S. District Decide Leonard Stark in Delaware was briefly suspended to permit the court docket to overview the influence of the New York decide’s resolution.

The public sale, during which 15 corporations and noteholders are pursuing Citgo’s belongings, is predicted to find out the way forward for the seventh-largest U.S. refiner. Frontrunners embrace a unit of miner Gold Reserve and Amber Vitality, an affiliate of hedge fund Elliott Funding Administration. A call on the winner is pending.

Failla’s resolution is predicted to assist untangle the public sale, which has seen three bidding rounds since final yr, legal professionals and consultants mentioned.

After the listening to resumed hours later, Decide Stark denied Gold Reserve’s movement to disqualify Amber’s bid and instructed a court docket officer overseeing the public sale to terminate a inventory buy settlement with the miner and signal a brand new one with Amber to maneuver the method ahead, Gold Reserve mentioned in a launch.

The transfer had been requested this week by court docket officer Robert Pincus and a few collectors in favor of Amber’s bid, which features a $2.1 billion pact to pay the bondholders.

Different events had proposed that Decide Stark maintain each gives on the desk.

Gold Reserve mentioned it was anticipating a written opinion and order from the court docket shortly. Amber didn’t reply to a request for remark. Representatives of the 2020 bondholders declined to remark.

The Delaware sale listening to completed on Thursday after greater than 30 hours of testimony and questioning.

(Reporting by Luc Cohen in New York and Marianna Parraga in Houston; Modifying by Marguerita Choy, Lisa Shumaker and Tom Hogue)