Page 4 - LatAmOil Week 42 2019

LatAmOil COMMENTARY LatAmOil
Citgo has been one of PdVSA’s best performing assets (Image: PdVSA)
PdVSA bond payment deadline nears
Neither Maduro nor Guaido will bene t if Venezuela’s national oil company loses control of Citgo
WHAT:
PdVSA is due to pay holders of its 2020 bonds $913mn on October 28.
WHY:
The titular government and the opposition will both be hard-pressed to cover this sum.
WHAT NEXT:
The US government will probably issue the asset protection order Guaido is seeking.
VENEZUELA’S national oil company (NOC) PdVSA is in a tight spot – and so is Juan Guaido, the opposition leader who declared himself the country’s interim president earlier this year.
On October 28, PdVSA is due to make pay- ments of $913mn to holders of bonds that are due to mature in 2020. If it fails to pay, bond- holders will – in theory, at least – be able to seize the collateral backing the securities.
is scenario has the potential to be disas- trous for PdVSA in the long term. e collateral in question is a 50.1% majority stake in Citgo, the US-based downstream refiner and fuel retailer that has consistently outperformed its parent company in the face of economic col- lapse and political turmoil in Venezuela. With- out this valuable asset, the NOC is sure to have a much more di cult time recovering from its currentcrisiswhen(andif)theimpassebetween Guaido and Venezuela’s titular President Nicolas Maduro, who secured re-election last year in a vote marred by claims of fraud, is resolved.
In the short term, this development would probably have a limited practical impact on PdVSA. e company does not currently have much access to Citgo’s co ers, as the additional sanctions imposed by Washington in early 2019 have e ectively cut o Caracas’ access to the PdVSA subsidiary.
Guaido’s dilemma
Guaido, on the other hand, would face serious di culties. e opposition leader has claimed the right to assert control over PdVSA and its subsidiary – and has sought to realise that control via the appointment of new boards of directors.
His motives for doing so are partly political;
that is, he is keen to deprive Maduro of control over key segments of the Venezuelan economy. But he also has a nancial interest in keeping Citgo solvent, in that he is looking to use the money earned by the PdVSA subsidiary as a means of nancial support for his cause.
In other words, if PdVSA defaults on its obli- gations and bondholders respond by seizing control of Citgo, Guaido will have a harder time continuing his e orts to force Maduro to step down.
He undoubtedly does not want more trouble on this front. us far, the president has proved much more resilient than the Venezuelan oppo- sition expected. Maduro has clung to power even in the face of continued unrest and punish- ing US sanctions. He has had no small amount of help from Moscow – and from Rosne , the state-ownedcompanythatisRussia’slargestoil producer – on this front.
The Russian factor
Rosne is now one of the few companies still taking delivery of Venezuelan oil, and its pro- le appears to be rising in Caracas. It went from handling 40% of Venezuela’s oil exports in July of this year to 66% in August.
Ostensibly, the Russian company is receiving Venezuelan oil as in-kind payment for its past loans to PdVSA. US o cials allege, though, that Rosne is acting as PdVSA’s lifeline, serving as a middleman for exports to third parties and pre- serving Venezuela’s access to world commodity markets.
ey have also suggested that the Russian government might step up its involvement in Venezuela’s oil sector in the event of a default by PdVSA. 
P4
w w w . N E W S B A S E . c o m Week 42 24•October•2019