The US District Court of Delaware on August 23 issued an order to seize shares in the US PDV Holding (PDVH) owned by the Venezuelan state oil company PDVSA. Through the PDVH, the Venezuelan company owns 100% of the sixth-largest US refinery, Citgo, with 49.9% of Citgo's shares pledged to Rosneft. The court instructed the US Marshals Service to deliver and hand over the order to the PDVH, follows from court documents studied by RBC.
This is the first stage of the procedure preceding the competitive sale of Citgo, which the Canadian company Crystallex is seeking, which challenges the transfer of Citgo shares as a pledge of Rosneft. Citgo shares have not yet been arrested. Rosneft has a week to file a petition and prevent the arrest and possible sale of the collateral.
Rosneft Trading, the Swiss subsidiary of Rosneft, received collateral rights for a 49.9% stake in Citgo in November 2016 as collateral for a $ 1.5 billion loan granted to Venezuela in 2016. According to Crystallex, which is seeking compensation from Venezuela for $ 1.4 billion by international arbitration, Rosneft Trading has received security rights under the "fraudulent scheme" of PDVSA for the removal of assets from creditors. Last year Crystallex filed lawsuits against PDVSA, PDVH and Rosneft Trading.
With Rosneft Trading and PDVSA, the daughter structures of ConocoPhillips were also tried. But on August 20, ConocoPhillips gave up claims to PDVSA, as the latter agreed to pay $ 2 billion in compensation to the US corporation. Rosneft Trading in the press release ConocoPhillips on the settlement agreement is not mentioned.
A representative of ConocoPhillips declined to comment in response to a request from RBC. The representative of Rosneft also declined to comment.
Request of Rosneft
Rosneft Trading asks the Delaware court to take into account its security rights to Citgo, follows from a letter sent to the court by the legal firm DLA Piper on August 22 (representing the interests of Rosneft's subsidiary). She insists on holding hearings, within which it would be possible to discuss the valuation of PDVH shares and their sale under the control of the court, the letter says.
Rosneft Trading insists that Citgo can not be forced to sell, as it is in a 100% charge: the Swiss company owns collateral rights for 49.9% of the shares of the refinery and the confirmed right of priority collection of this asset, and the remaining 50.1% are in pledge on bonds PDVSA, subject to redemption in 2020. Rosneft Trading asks the court to notify the company of further hearings on this issue because they may affect its rights, as well as the rights of "a multitude of other interested parties".
Assets for $ 3.5 billion
The fact that the arrest warrant will potentially affect the rights of other creditors of the PDVSA can not serve as a reason for refusing to execute the decision rendered in favor of Crystallex, a court representing Richards Layton & Finger (RLF) representing Richlex interests in the letter said on August 20.
Morris, Nichols, Arsht & Tunnell, representing the interests of Citgo, wrote in a letter to the Delaware court that the court was not authorized to authorize the arrest and sale of PDVH shares in view of the PDVSA appeal and therefore should refrain from any actions aimed at the arrest or sale of these shares .
The cost of Citgo is about $ 6.5-7.8 billion, based on the multiplier of 5-6 EBITDA earnings of the company, which for the fiscal year ending in September 2017 was $ 1.3 billion, according to a review by senior credit analyst Bloomberg Intelligence Jaimin Patel . Thus, Rosneft has collateral rights for an asset with a potential value of $ 3.2-3.9 billion.
In the summer of 2017, Reuters reported that Rosneft is negotiating with the PDVSA to exchange its security interests in Citgo shares for shares in oil fields and an agreement on the supply of fuel.
Steve Mnuchin, the head of the US Treasury, is aware of the dispute over Citgo: in the spring of 2017, US senators called on the minister to investigate the transfer of collateral rights to the Rosneft subsidiary to the Houston refinery, believing that his transfer to the Russian company's ownership would "seriously undermine the national security and energy independence of the United States ".
Scenarios of the denouement
"It is not known what kind of rights are regulated by the collateral relations between Rosneft and PDVSA, and also how Rosneft's rights under the deal are correlated with the US security law, which will be applicable in resolving a dispute over imposing a charge on property located in the United States," he said. RBC Managing Partner of the company "Criminal Code" Law and Business "Alexander Pakhomov. Whether Rosneft will have the pre-emptive right to satisfy its rights as a pledgee will depend on the applicable law and whether the term for the repayment of the PDVSA loan has come, the expert notes.
But if the court goes to meet Crystallex and recognizes the transaction as invalid, Rosneft's "daughter" will lose the status of a secured creditor and the asset, which is not encumbered with the pledge, can be easily and simply sold, thus satisfying the requirements of Crystallex, says Pakhomov.
If the pledge was received in a proper way, Crystallex will still be able to foreclose on shares of PDVH, but will receive an asset encumbered with collateral, argues the source of RBC in an international legal consulting company. Crystallex can pay out a PDVSA loan to Rosneft and pay off the collateral, but if the loan obligations are significant (Crystallex said it's about $ 1.5 billion), then this operation for Crystallex has no economic sense, the lawyer says.