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U.S. refiner Citgo taking offers on $1.8-billion, three-year loan: sources

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(Reuters) – Citgo Petroleum, the U.S.-based subsidiary of Venezuelan state-run oil firm PDVSA, is seeking to raise $1.8 billion through a three-year term loan to cover operating expenses and to refinance existing debt, three people close to the deal told Reuters on Thursday.

The financing would help Citgo fund operations and replace an existing revolving credit line, following U.S. sanctions and its split from the parent company, which remains under control of Venezuelan President Nicolas Maduro and a military-led management team.

Washington imposed sanctions and barred U.S. firms, including Citgo, from importing Venezuelan crude as part of a strategy to starve the Maduro government of oil revenue and force his ouster.

Since Venezuelan congress head Juan Guaido invoked the constitution to assume interim presidency in January, saying Maduro’s re-election was not legitimate, a fierce battle has emerged for control of Citgo, Venezuela’s largest foreign asset, which has been valued at $8 billion to $13 billion.

A first round on U.S. sanctions imposed on Venezuela in 2017 stopped Citgo from paying dividends to its parent and limited its ability to raise financing, leaving much of an about $900 revolving credit untapped.

A portion of Citgo’s equity separately was used by PDVSA in 2016 as collateral for a $1.5 billion loan from Russian energy giant Rosneft. Another portion of its equity backs PDVSA’s 2020 bonds, the only Venezuelan bonds that have not entered default.

At the end of September, Citgo had $3.4 billion in financial debt and $490 million in cash. Its net income was nearly $500 million, from gross revenue of $23 billion in the first nine months of 2018, according to a person with access to the quarterly report.

Citgo did not reply to a request for comment.

The refinancing does not include Citgo’s bonds, according to the people.

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Citgo board’s chairwoman, Luisa Palacios, last week said U.S. sanctions imposed on PDVSA in January were “a shock” for the firm as it is no longer able to import Venezuelan crude that historically fed two of its three refineries, but a contingency plan has helped it weather the storm.


Money from the new three-year loan is expected to be used by Citgo mainly to replace its existing revolver, which would expire in July. It is also expected to settle over $200 million in accounts receivable that had been converted into financial debt.

Citgo’s refinancing operation had a slow start, but attracted many proposals in recent days, according to two of the sources. The company was looking to raise $1.2 billion, but recently increased the amount of the loan by $600 million, one of the sources said.

“Coupon should be around 4.5-5.5 percentage points above Libor (rate),” that source said. “That’s not great, but it is good enough for Citgo under these circumstances.”

An announcement on the refinancing results is expected to be made by Citgo by the end of the month, when the company plans to have a call with investors, one of the sources said.

Reporting by Marianna Parraga and David J. French, Editing by Rosalba O’Brien and Marguerita Choy

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