/raid1/www/Hosts/bankrupt/TCRLA_Public/190731.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Wednesday, July 31, 2019, Vol. 20, No. 152
Headlines
A R G E N T I N A
ARGENTINA: Candidate Says He'd Stop Paying Central Bank Interest
TRANSPORTADORA DE GAS: S&P Affirms 'B' Ratings, Outlook Stable
B R A Z I L
SCHAHIN HOLDINGS: Chapter 15 Case Summary
C H I L E
[*] CHILE: Seeks Stronger Ties, Free Trade With China
C O S T A R I C A
LIFEMILES LTD: Moody's Cuts CFR to B2; Alters Outlook to Negative
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: Political Manipulation Stagnates Agro Sector
M E X I C O
UNIQUE TOOL: Case Summary & 20 Largest Unsecured Creditors
P U E R T O R I C O
DIAMONDS AND DIAMONDS: WGD Seeks to Prohibit Cash Collateral Use
V E N E Z U E L A
CITGO PETROLEUM: Venezuela Stake Can Be Seized, Appeals Court Says
- - - - -
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A R G E N T I N A
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ARGENTINA: Candidate Says He'd Stop Paying Central Bank Interest
----------------------------------------------------------------
Patrick Gillespie at Bloomberg News reports that Argentine
presidential candidate Alberto Fernandez said his government would
stop paying interest on central bank notes if he wins this year's
elections.
Bloomberg News relates that Fernandez would cease interest payments
on notes known as Leliq, used to implement monetary policy, in
order to raise retiree pensions by 20% once he takes office Dec.
10, according to an interview.
"We're going to stop paying the interest on Leliqs that Argentines
are paying for every day," Fernandez told local outlet El Destape
in an interview, according to Bloomberg News.
His remarks come two weeks before a primary elections to be held
Aug. 11, which will signal how Argentines plan to vote on Oct. 27.
Fernandez, running alongside former president Cristina Fernandez de
Kirchner, has given few specifics on economic plans, Bloomberg News
notes.
Argentine policy makers have used the Leliq rate to fight
double-digit inflation since October, Bloomberg News relays. The
central bank sets its benchmark interest rate every day based on
two auctions of the 7-day notes, Bloomberg News relays.
Yet, one of Fernandez's top economic advisers said the presidential
candidate was referring to lowering the rate in order to reduce
interest payments rather than stop paying them, notes Bloomberg
News.
"The interpretation of default is wrong," Matias Kulfas said by
phone, Bloomberg News relates. "Alberto never mentioned a
default," Mr. Kulfas added.
About Argentina
Argentina is a country located mostly in the southern half of South
America. It's capital is Buenos Aires. Mauricio Macri is the
incumbent president of Argentina.
Argentina has the third largest economy in Latin America. The
country's economy is an upper middle-income economy for fiscal year
2019 according to the World Bank. Historically, however, its
economic performance has been very uneven, with high economic
growth alternating with severe recessions, income maldistribution
and--in the recent decades--increasing poverty.
As reported in the Troubled Company Reporter-Latin America on
July 16, 2019, Moody's Investors Service changed the outlook for
the Government of Argentina to negative from stable. Concurrently,
Moody's has affirmed the B2 foreign-currency and local-currency
long-term issuer and senior unsecured ratings. The senior unsecured
ratings for shelf registrations were also affirmed at (P)B2. At
the same time Argentina's short-term rating was affirmed at Not
Prime (NP). The senior unsecured ratings for unrestructured debt
were affirmed at Ca and the unrestructured senior unsecured shelf
affirmed at (P)Ca.
TRANSPORTADORA DE GAS: S&P Affirms 'B' Ratings, Outlook Stable
--------------------------------------------------------------
On July 29, 2019, S&P Global Ratings affirmed its 'B' foreign and
local currency ratings on Argentina-based natural gas
transportation company Transportadora de Gas del Sur S.A. (TGS). At
the same time, S&P affirmed its 'B' rating on the company's senior
unsecured notes for $500 million due 2025 and maintained the
stand-alone credit profile (SACP) at 'bb'. The stable outlook on
the company reflects that on the sovereign.
S&P said, "The rating affirmation on TGS reflects our expectation
that despite its solid cash flow generation and current and
projected robust credit metrics, the 'B' sovereign rating on
Argentina continues to limit TGS's credit quality because the
company won't be able to withstand in our view a sovereign stress
scenario. The sovereign stress scenario includes doubling of
inflation rate, sharp currency depreciation, a GDP drop of around
10%, and frozen rates for utilities. At the same time, TGS's 'bb'
SACP reflects the company's still relatively low leverage as seen
in our expectations of adjusted debt to EBITDA of below 1.5x, and
relatively stable financial and operating performance in the next
two years.
"Our updated forecast for 2020 incorporates the implementation of
the Integral Tariff Review (ITR) in the company's regulated
segment, along with the additional tariff increase in January 2020,
which was supposed to originally occur in October 2019. (As of the
end of 2018, the regulated segment represented about 65% of the
company's EBITDA.) We now expect a slightly lower EBITDA for 2019
because of the tariff-increase shift to January 2020, but EBITDA
should normalize in that year. We continue to expect about 40% of
TGS's EBITDA to come from the natural gas liquid (NGL) production
segment, which depends on international prices and volumes sold."
The ratings on TGS also incorporate its expansionary capital
expenditures (capex) plan that includes the construction of a
pipeline and a conditioning plant. The pipeline's construction is
likely to be finished by year-end, and it will have a capacity of
60 million cubic meters per day (MMm3/d), with a total disbursement
of around $300 million. The pipeline will transport the gas
produced in the country's Vaca Muerta field to a conditioning plant
with an initial capacity of 5 MMm3/d.
Ratings List
Ratings Affirmed
Transportadora de Gas del Sur S.A. (TGS)
Issuer Credit Rating B/Stable/--
Senior Unsecured B
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B R A Z I L
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SCHAHIN HOLDINGS: Chapter 15 Case Summary
-----------------------------------------
Chapter 15 Debtor: Schahin Holdings S.A.
Base Engenharia E Servicos de Petroleo
E Gas SA et al.
Rua Arquiteto Olavo Redig de Campos
105 - 10th Floor
04711-904, Sao Paulo
Brazil
c/o Sequor Law, PA
1001 Brickell Bay Drive, 9th Floor
Miami, FL 33131
Business Description: Schahin Holdings S.A.'s business
includes holding or owning securities
of non-financial institutions.
Foreign Proceeding: Case No. 1037133-31.2015.8.26.0100
2nd Bankruptcy Court Sao Paulo, Brazil
Chapter 15
Petition Date: July 26, 2019
Court: United States Bankruptcy Court
Southern District of Florida (Miami)
Chapter 15 Case No.: 19-19932
Judge: Hon. Robert A Mark
Foreign
Representative: KPMG Corporate Finance LTDA
represented by Osana Mendonca
Rua Arquiteto Olavo Redig de Campos
105 -10th Floor
04711-904, Sao Paulo
Brazil
Foreign
Representative's
Counsel: Amanda E. Finley, Esq.
SEQUOR LAW, P.A.
1001 Brickell Bay Drive, 9th Floor
Miami, FL 33131
Tel: 305-372-8282
E-mail: afinley@sequorlaw.com
Estimated Assets: Unknown
Estimated Debt: Unknown
A full-text copy of the petition is available for free at:
http://bankrupt.com/misc/flsb19-19932.pdf
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C H I L E
=========
[*] CHILE: Seeks Stronger Ties, Free Trade With China
-----------------------------------------------------
EFE News reports that Chilean President Sebastian Pinera met with
Chinese Foreign Minister Wang Yi for talks on strengthening
bilateral ties, free trade and multilateral accords, official
sources reported.
Boosting free trade also comes amid the US-China trade war and the
need to strengthen the World Trade Organization, the sources said
after the meeting at La Moneda Palace, seat of the Chilean
presidency, according to EFE News.
During the meeting, China said it will collaborate with Chile in
the organization of the next summit of the Asia-Pacific Economic
Cooperation (APEC) Forum and of the UN Framework Convention on
Climate Change (COP25), to be held next November and December,
respectively, in the South American nation, the report notes.
EFE News says that the Chilean president also spoke of his concern
about the regional impact of the crisis in Venezuela, and asked for
China's help in finding a solution.
Wang Yi's visit to Chile is related to the celebration in 2020 of
the 50th anniversary of the "very deep, fruitful" diplomatic
relations between the two countries, and in that context, both
countries committed to continue developing those ties and to
strengthen their cooperation, the report says.
The report relays that Pinera also expressed the importance of
increasing the exchange of goods, services and investments, and
recalled that Chile is soon to call for bids on the construction of
a fiber-optic connection between the American continent and Asia
and to implement fifth generation cellular technology (5G).
The president said in that regard that Chile will call for bids on
those projects in a public, transparent way, inviting companies of
all countries to take part, the report relays.
Three months ago, Pinera visited China, where he signed a strategic
collaboration accord in science, innovation and technology with the
city of Shenzhen, which, as he said, is concrete evidence of the
mutual collaboration between the two countries, the report notes.
On that tour, Pinera met with President Xi Jinping, Prime Minister
Li Keqiang and the head of the National Popular Assembly, Li
Zhanshu, the report relays.
He also had meetings with leaders of some 10 technology companies
specializing in innovation, artificial intelligence, robots,
telecommunications and cloud services, and signed with local
authorities the 2019-2022 Action Plan, which establishes a number
of priority work areas: the environment, education, investment,
infrastructure and energy, among others, the report relays.
In 1970, Chile was the first South American country to establish
diplomatic relations with China, which is currently its main trade
partner with 27.8 percent of its total foreign trade, the report
adds.
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C O S T A R I C A
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LIFEMILES LTD: Moody's Cuts CFR to B2; Alters Outlook to Negative
-----------------------------------------------------------------
Moody's Investors Service downgraded to B2 from Ba2 LifeMiles
Ltd.'s corporate family and senior secured ratings. The outlook has
been revised to negative from stable.
Downgrades:
Issuer: LifeMiles Ltd.
Corporate Family Rating, Downgraded to B2 from Ba2
Senior Secured Bank Credit Facility, Downgraded to B2 from Ba2
Outlook Actions:
Issuer: LifeMiles Ltd.
Outlook, Changed To Negative From Stable
RATINGS RATIONALE
LifeMiles' downgrade to B2 reflects its exposure to the weak credit
profile and liquidity pressures of Avianca Holdings, S.A. (Avianca)
which increases the risk of additional up streaming of cash flows
to shareholders, either in the form of dividends, most likely
financed with incremental debt, or anticipated purchases of airline
tickets. LifeMiles' B2 ratings also incorporates its good liquidity
and solid business model being the sole operator of Avianca's
frequent flyer program, its diversified and sticky base of
commercial partners and co-brand credit card growth. Also reflected
in the rating are the potential benefits to the company's growth
plan from improved economic dynamics in its largest markets.
The rating of the term loan takes into consideration its secured
position within the capital structure of the company. The corporate
family rating is at the same level of the senior secured rating
given that it is the only debt in the company's capital structure.
On July 22, Avianca announced it has temporarily deferred payments
on some long-term leases and on principal payments on certain
loans. On the same date, Avianca announced that it will commence as
soon as possible an exchange offer for all of its $550 million
senior notes due in May 2020.
LifeMiles has a strong business model that includes unrelated
commercial partners and co-branded credit cards, but its single
largest contributor to gross billings is Avianca, who together with
its air partners, represent around 30% of gross billings. As such,
if Avianca were to face operating problems this would hamper
LifeMile's operation as customers' interest in purchasing, adding
or converting LifeMiles miles into Avianca's air tickets would
decline. Moreover, Avianca's liquidity pressures may affect
LifeMiles' credit profile in the form of debt-financed dividend
payments which will ultimately result in higher leverage. For
example, in August 2017 LifeMiles obtained a $300 million
amortizing term loan used to pay dividends, and in 2018 and 2019
the company up-sized its outstanding term loan by a total of $195
million which also up streamed to its shareholders. Still, the
rated term loan has a mandatory prepayment clause that obliges the
use of a percentage of excess cash to pay down the term loan. This
clause partly offset the risk of cash leakage at LifeMiles before
fulfilling its debt payment obligations. Furthermore, LifeMiles'
solid corporate governance framework, and particularly Advent
International's strong minority shareholder rights, also mitigate
the risk of a potential cash leakage before payment of debt
obligations. In addition, LifeMiles liquidity policy of maintaining
a minimum cash balance equivalent to six months of rewards plus two
quarters of debt service also mitigates this risk.
Moody's estimates that, absent additional indebtedness, LifeMiles'
leverage (adj. debt/EBITDA) would gradually decline from 3.3 times
as of March 31, 2019 to below 3.0 times by year-end 2020.
Nonetheless, Moody's believes LifeMiles could increase its
indebtedness to finance dividend payments over the next few
quarters.
LifeMiles has good liquidity. The company generates strong cash
flow from operations and has limited capital spending requirements.
It has minimum cash requirements to cover six months of rewards
plus two quarters of debt service. In addition, LifeMiles benefits
from a five-year $20 million committed revolving credit facility,
which is currently undrawn.
LifeMiles' largest contributors to gross billings are its financial
partners (50%) and Avianca and air partners (30%), being Avianca
its largest customer, responsible for approximately 26% of gross
billings. Around 80% of accrued miles are redeemed, with 92% being
redeemed into air tickets. The 8% balance is redeemed into
non-ticket rewards. LifeMiles benefit from Avianca's leading market
position in Colombia and Central America.
LifeMiles has around nine million members, more than 100 agreements
with financial institutions including co-branded credit cards and
miles conversion agreements, and more than 700,000 active
co-branded credit cards. The number of members has grown steadily
at a 9.3% CAGR in the last five years.
LifeMiles' largest market is Colombia where it generates 42% of its
gross billings. It also sells miles in Peru, Costa Rica, El
Salvador, Honduras, Guatemala, and the US; being the US the only
contributor of more than 10% to gross billings. Moody's forecasts
the Colombian economy will grow by 3.3% in 2019 and 3.5% in 2020.
Similarly, Moody's estimates that, in Colombia, private consumption
will grow at a 4% CAGR and retail sales will grow at a CAGR of 4.6%
in 2019-2023.
The negative outlook reflects its view that the company's credit
quality may be negatively impacted by Avianca's weak financial
profile and that LifeMiles will be required to increase its
dividend payout.
An upgrade would require an improvement in Avianca's credit profile
and maintaining ring-fencing provisions that limit cash upstream to
shareholders, as well as the maintenance of adequate liquidity and
profitability. Quantitatively, an upgrade would require LifeMiles
to maintain its adjusted debt/EBITDA lower than 4.0 times on a
sustained basis.
The ratings could be downgraded if the company's profitability or
credit metrics worsen, with adjusted debt/EBITDA remaining above
5.0 times. A deterioration in the company's liquidity or
profitability, or a change in the company's financial policy
leading to excessive cash distribution to shareholders can lead to
a downgrade. Also, any further weakening on Avianca's credit
profile or repetitive amendments to the loan agreement such that
the mandatory prepayment provisions are waived or canceled, and
excess cash flow is not used to pay down debt could result in a
downgrade.
The principal methodology used in these ratings was Business and
Consumer Service Industry published in October 2016.
LifeMiles, Ltd. is a coalition loyalty program and the solely
operator of Avianca's frequent flyer program. LifeMiles has
commercial partnerships that allow its members to accrue and redeem
miles for different products and services such as airline tickets,
hotels, and rental cars amongst others. LifeMiles is 70% owned by
Avianca Holdings, S.A. and 30% owned by Advent Intl. LifeMiles
reported gross billings of $352 million over the twelve months
ended March 31, 2019.
===================================
D O M I N I C A N R E P U B L I C
===================================
DOMINICAN REPUBLIC: Political Manipulation Stagnates Agro Sector
----------------------------------------------------------------
Dominican Today reports that Agribusiness leader Manuel Castillo
Pimentel labeled Dominican Republic's agriculture as stagnant,
because in his view the sector is politically manipulated.
Castillo, a leading grower and exporter in the country of avocados
to the US and Europe, said the situation is more evident in the
southern part of the country, "where there are no coherent policies
aimed at developing that sector," according to Dominican Today.
"What needs to be done is known, but politics distorts everything.
In provinces such as Azua, Elias Pina and San Juan with few
resources, agriculture can be modernized, but everything always
remains in promises," the report quoted Mr. Castillo as saying.
He cited as an example that 75% of the water produced by those
provinces goes to the sea, taking advantage of only 25%, which he
affirms can be corrected by damming the river basins in the south,
modernizing the drip irrigation systems and creating cooperatives
that make producers more efficient, the report relays.
He added that the shortcomings in the agro sector remain due to the
lack of will of Govt. leaders, whom he says are only interested in
politics and what is convenient for them at a given time, the
report discloses. "The agricultural sector remains stagnant and
has not undergone substantial improvements over the years . . . the
South region will continue to collapse," he added, notes the
report.
About Dominican Republic
The Dominican Republic is a Caribbean nation that shares the island
of Hispaniola with Haiti to the west. Capital city Santo Domingo
has Spanish landmarks like the Gothic Catedral Primada de America
dating back 5 centuries in its Zona Colonial district.
The Troubled Company Reporter-Latin America reported on April 4,
2019 that the Dominican Today related that Juan Del Rosario of the
UASD Economic Faculty cited a current economic slowdown for the
Dominican Republic and cautioned that if the trend continues,
growth would reach only 4% by 2023. Mr. Del Rosario said that if
that happens, "we'll face difficulties in meeting international
commitments."
An ongoing concern in the Dominican Republic is the inability of
participants in the electricity sector to establish financial
viability for the system.
Standard & Poor's credit rating for Dominican Republic stands at
BB- with stable outlook (2015). Moody's credit rating for Dominican
Republic was last set at Ba3 with stable outlook (2017). Fitch's
credit rating for Dominican Republic was last reported at BB- with
stable outlook (2016).
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M E X I C O
===========
UNIQUE TOOL: Case Summary & 20 Largest Unsecured Creditors
----------------------------------------------------------
Debtor: Unique Tool & Manufacturing Co., Inc.
100 Reed Drive
Temperance, MI 48182
Business Description: Unique Tool & Manufacturing --
http://www.uniquetool.com/-- is a custom
metal stamping company supplying stampings
to the satellite, communications,
electrical, appliance, refrigeration, and
automotive industries throughout the United
States, Canada and Mexico. The Company
specializes in tool and die manufacturing,
brazing, welding, plating, and more.
Chapter 11 Petition Date: July 26, 2019
Court: United States Bankruptcy Court
Northern District of Ohio (Toledo)
Case No.: 19-32356
Judge: Hon. Mary Ann Whipple
Debtor's Counsel: Steven L. Diller, Esq.
DILLER AND RICE, LLC
124 East Main Street
Van Wert, OH 45891
Tel: (419) 238-5025
E-mail: steven@drlawllc.com
Kim@drlawllc.com;
Eric@drlawllc.com
Estimated Assets: $0 to $50,000
Estimated Liabilities: $1 million to $10 million
The petition was signed by Daniel Althaus, president.
A full-text copy of the petition containing, among other items, a
list of the Debtor's 20 largest unsecured creditors is available
for free at:
http://bankrupt.com/misc/ohnb19-32356.pdf
=====================
P U E R T O R I C O
=====================
DIAMONDS AND DIAMONDS: WGD Seeks to Prohibit Cash Collateral Use
----------------------------------------------------------------
Secured creditor World's Gold & Diamonds, Inc., asks the U.S.
Bankruptcy Court for the District of Puerto Rico to prohibit debtor
Diamonds and Diamonds, Inc. from using or selling all property of
the estate in which WGD has a security interest.
Just recently, WGD moved to convert Debtor's case to Chapter 7 due
to Debtor's failure to obey court orders, gross mismanagement,
unauthorized use of cash collateral, and failure to make adequate
protection payments.
On Jan. 18, 2019, the Court issued an order granting WGD's motion
for adequate protection, for the following requested relief:
(1) Adequately protect WGD by retroactively ordering Debtor
to pay post-petition interest from July 10, 2017 on the principal
balance of $112,329.55 at the contract rate of 1.5% per month.
Through Dec. 31, 2018, the accrued interest is $29,858.12;
(2) Adequately protect WGD by prospectively ordering Debtor
to pay interest of 1.5% on $112,329.55 by the 5th day of each
month, a monthly sum that equals $1,684.94;
(3) To the extent such payments do not adequately protect
WGD
interest, order a replacement lien in favor of WGD on all property
of the estate, and in failure of that, grant WGD's claim
super-priority status under 11 U.S.C. Section 507(b);
(4) Order Debtor to segregate and account for all cash
collateral under 11 U.S.C. Section 363(c)(4); and
(5) Order that the above adequate protection will be
incorporated within and survive the confirmation of any plan of
reorganization.
Instead of complying with the Court's adequate protection order and
commencing payments to WGD, Debtor filed a motion for
reconsideration. In its Order denying Debtor's Motion for
Reconsideration, the Court upheld the validity of WGD's security
interest by granting WGD's motion for summary judgment that
dismissed Debtor's complaint in Adversary Proceeding 18-00040.
Meanwhile, WGD learned that Debtor continues to operate its
business, selling the collateral securing WGD's claim and without
segregating and accounting for said cash collateral as required by
11 U.S.C. Section 363(c)(4) and the Court's order for adequate
protection. During this time, approximately $45,000 in professional
fees (not just legal fees) had been paid for or on behalf of Debtor
without disclosure, permission, or both.
Without obtaining the Court's permission, the Debtor has also been
using cash collateral earned from the sale of inventory.
Specifically, a significant portion of the cash disbursements have
been received by the following insiders: Jose Valdivia, Debtor's
president; Magaly Hernandez, Debtor's treasurer, an Marly
Hernandez, Debtor's secretary. Also, the Debtor was paying rent of
$6,000 (reduced to $4,000 in November 2018) per month to San Juan
Office Center, Inc., which is wholly-owned by Mr. Valdivia.
On July 12, after stating that it has been unable to retain
counsel, the Debtor also asked that the case be converted to a
Chapter 7, which was reiterated by acting attorney Antoan Figueroa,
who at the same time disclaims the legal representation of Debtor.
Given the rapidly diminishing value of WGD's collateral (including
cash collateral), WGD asks the Court to prohibit the Debtor from
using or selling the collateral and to direct the Debtor to take
all necessary and useful steps to secure the collateral to prevent
any loss or damage thereto -- which include, but are not limited
to, closing and locking Debtor's store and maintaining insurance on
its inventory.
Counsel for World's Gold & Diamonds:
David R. Martin
D.R. Martin, LLC
5200 Peachtree Rd, Suite 3116
Atlanta, GA 30341
Tel: (770) 454-1999
Tel: (877) 352-8839 (toll free)
Fax: (770) 458-5709
E-mail: dmartin@abogar.com
Diamonds and Diamonds, Inc., sought protection under Chapter 11 of
the Bankruptcy Code (Bankr. D.P.R. Case No. 17-04882) on July 10,
2017.
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V E N E Z U E L A
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CITGO PETROLEUM: Venezuela Stake Can Be Seized, Appeals Court Says
------------------------------------------------------------------
Andrew Scurria at The Wall Street Journal reports that a U.S.
appeals court said Venezuela's stake in U.S.-based oil refiner
Citgo Petroleum Corp. could be seized to satisfy a judgment against
the country, dealing a blow to its U.S.-backed opposition
government.
The U.S. Court of Appeals for the Third Circuit sided with
Crystallex International Corp., a defunct Canadian gold miner that
has laid claim to Citgo's valuable Gulf Coast crude refineries to
collect on a $1.4 billion debt, according to The Wall Street
Journal.
The ruling further clouds the future of Citgo, which has considered
filing for bankruptcy to sort out competing claims from creditors,
the report notes. As Venezuela's largest seizable asset in the
U.S., Citgo is an obvious source of compensation for bondholders
and multinational companies that are owed billions of dollars and
haven't been paid during the country's lengthy economic meltdown,
the report relays.
Of all the claimants circling Citgo, Crystallex was the first to
fight its way to the company's front door, winning permission from
a Delaware federal judge last year to seize shares in Citgo's U.S.
parent company, the report discloses.
Crystallex, which partnered with Venezuela on a gold-mining venture
that soured in 2011, has said it wants to put those shares up for
sale, potentially wresting control of Venezuela's largest known
external asset. Any sale would require approval from the U.S.
Treasury Department, according to the decision, the report relays.
Led by self-proclaimed president Juan Guaido, Venezuela's
opposition government took effective control of Citgo in February
from the ruling leftist regime and had urged U.S. courts to protect
the company from creditors, the report notes.
According to The Journal, the opposition's lawyers can ask the
Third Circuit to rehear the case. If they lose, they can then
appeal to the U.S. Supreme Court. But if the ruling stands, the
Trump administration may have to choose between curtailing
creditors' collateral rights or allowing Citgo to slip from the
opposition's grasp, the report says.
A Crystallex spokesman said it reached out in recent months to the
opposition, hoping to negotiate "a fair settlement that would
compensate Crystallex for its property and preserve the value of
Citgo for the Venezuelan people," the report notes.
Citgo remains a flashpoint in the political struggle gripping
Caracas, where President Nicolas Maduro has kept his hold on key
state institutions and the military despite food shortages, rampant
hyperinflation and international criticism over human-rights
abuses, the report relays.
Crystalex isn't the only creditor circling Citgo. Other companies
with claims against Venezuela also are targeting the company,
including Owens-Illinois Inc., ConocoPhillips Co. and Rusoro Mining
Ltd, notes The Journal.
Under Mr. Maduro, Venezuela mortgaged Citgo to borrow money from
bondholders and Russian oil giant OAO Rosneft, putting pressure on
the opposition to come up with the cash to pay them, the report
relays.
Citgo's refineries were key buyers of Venezuelan crude until the
White House imposed sanctions in January that shut down oil trading
between the U.S. and Venezuela, the report notes. Now, Citgo is
under new leadership and all but severed from its owner, state oil
giant Petroleos de Venezuela SA.
Venezuelan oil officials loyal to Mr. Maduro sued Citgo's
U.S.-recognized directors in a Delaware court last month in an
attempt to reclaim control from Mr. Guaido, the report notes. The
judge overseeing that case hasn't yet ruled on which corporate
officers have the better claim to the company.
Mr. Maduro's government last year paid Crystallex $500 million in
hopes of saving Citgo from seizure but failed to pay additional
installments, prompting Crystallex to resume its collection
efforts, notes the report.
Citgo, one of the largest U.S. refiners and a wholly owned
Venezuelan state asset since 1990, has said that a sale of the
company would put its debt into default, jeopardizing thousands of
U.S. jobs, the report relays. The company is part of the White
House's strategy to provide Mr. Guaido and his allies with the keys
to state assets that would give the Venezuelan military an
incentive to back the opposition, the report notes.
In addition to Citgo, those assets also include gold reserves at
the Bank of England, financial accounts in the U.S., including at
the New York Federal Reserve, and money seized or frozen by U.S.
authorities, the report notes. Yet, Mr. Guaido's movement has lost
momentum against Mr. Maduro after months of street demonstrations
and international sanctions failed to unseat him, adds the report.
As reported in the Troubled Company Reporter-Latin America on
April 2, 2019, S&P Global Ratings said it assigned its 'B+'
issue-level rating and '1' recovery rating to U.S.-based refinery
and petroleum product marketer and distributor CITGO Petroleum
Corp.'s $1.2 billion senior secured term loan due in 2024. At the
same time, S&P Global Ratings placed the rating on CreditWatch with
developing implications.
The company plans to use the proceeds from the financing to provide
liquidity for ongoing business needs. In addition, the company
plans to terminate its revolving credit facility and AR
securitization facility.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Latin America is a daily newsletter
co-published by Bankruptcy Creditors' Service, Inc., Fairless
Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C.,
USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T.
Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A.
Chapman, Editors.
Copyright 2019. All rights reserved. ISSN 1529-2746.
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