November 25, 2015 / 11:51 PM / 3 years ago

Canada's Crystallex files complaint over Venezuela Citgo debt issue

CARACAS (Reuters) - Canadian miner Crystallex filed a complaint in a U.S. court, seeking to recover $2.8 billion it says it is owed from Venezuela’s state-run oil company PDVSA and its U.S. subsidiary.

People walk past a sign with a PDVSA logo at its gas station in Caracas, October 28, 2015. REUTERS/Marco Bello

Crystallex, which filed the complaint Monday in Delaware, said PDVSA and its U.S.-based refining unit Citgo Holding designed a refinancing deal to lower Citgo’s value and dissuade asset seizures stemming from arbitration awards.

Crystallex is also engaged in a $3.1 billion arbitration claim against Venezuela before an international tribunal. The company is seeking compensation for the termination of its Las Cristinas gold asset in Venezuela.

Citgo Holding this year issued bonds and loans worth around $2.8 billion, with dividends distributed to headquarters in Venezuela, which is suffering a recession and has been hurt by sliding oil prices.

The debt, Crystallex says in the complaint filed Monday, was designed to leave Citgo insolvent on an accounting basis just as arbitration cases are coming to fruition.

“Through PDVSA and its subsidiaries, Venezuela sought to monetize its interests in (Citgo) and repatriate those proceeds, thereby shielding them from attempts to enforce any arbitral award,” Crystallex said in the filing.

“Because of this diminution in the value of (Citgo), Crystallex’s ability to recover has been substantially impaired.

“Crystallex is therefore entitled to money damages in the amount of $2.8 billion or the final amount of its arbitration award against Venezuela, whichever is lower.”

Dozens of companies have sought compensation after their projects were taken over under late leftist president Hugo Chavez, who led a wave of nationalizations during his 1999-2013 rule that included the oil, electricity and steel industries.

These entities could seek to grab OPEC nation Venezuela’s international assets to enforce arbitration awards.

Any perceptions that Venezuela might be seeking to reduce its global exposure by shedding or devaluing assets is also of worry to bondholders.

In the filing, Crystallex asked The United States District Court For The District Of Delaware to bar the defendants from moving further assets out of the United States.

The company added it expects a decision on its $3.1 billion arbitration claim at the International Centre for Settlement of Investment Disputes (ICSID) tribunal “in the near future.”

PDVSA [PDVSA.UL] did not immediately respond to requests for comment.

Writing by Alexandra Ulmer; Editing by David Gregorio

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