Venezuela Bondholders’ Claim on Citgo to Be Decided by New York’s Top Court

A federal appeals court deferred ruling on whether U.S. bondholders have valid claims over Venezuela’s prized oil refiner Citgo Petroleum Corp., instead asking New York state’s highest court to decide on the disputed $1.7 billion debt, WSJ Pro Bankruptcy reported. The Second Circuit Court of Appeals in New York asked for guidance on whether bondholders are entitled to seize the controlling stake in Citgo they hold as collateral after Venezuela’s opposition movement stopped making payments on bonds secured by the Houston-based refiner. Yesterday’s ruling leaves unsettled, for now, bondholders’ ability to foreclose on Citgo or force a negotiated deal with the Venezuelan opposition leaders who took control of the business in 2019. The company, which owns U.S. refineries, pipelines and terminals in addition to supplying thousands of Citgo-branded gasoline stations across 30 states, has been tied up in the long standoff between Venezuelan President Nicolas Maduro, the opposition movement that has sought to topple him, and their respective international allies. As part of a U.S. pressure campaign against Mr. Maduro, the Trump administration in 2019 placed control of Citgo with U.S.-backed opposition leaders and shielded it from the claims of creditors owed money by the bankrupt government in Caracas. The opposition didn’t make a scheduled payment of principal and interest in 2019 to bondholders and instead sued in New York federal court to have the debts declared unenforceable. A New York judge sided with bondholders in 2020, prompting the opposition’s appeal to the Second Circuit. President Biden has kept Citgo’s protections against seizure in place even as opposition fractured in Venezuela and lost political support. The company’s future and its continued Venezuelan ownership are now clouded by U.S. plans to ease sanctions on Mr. Maduro, in return for progress toward free elections in 2024. Read more.