The conditions and collateral (CITGO) with which this transaction was agreed between the Maduro regime and the buyers of the 2020 Bond were illegal and fraudulent since they were not approved by the National Assembly, as established by the Constitution.
In addition, the illegitimate Supreme Court of Justice, managed by Maduro, was used to paralyze the investigations initiated by the National Assembly on the risk posed by the 2020 Bonds of the Nations Assets, with the placement of CITGO as a guarantee of payment.
The 2020 bonds are Maduro’s bonds and become the last foreign debt operation made by the regime, once the continued coup d’etat against the National Assembly began. In this sense, Nicolás Maduro is solely responsible for putting at risk important assets of Venezuelans and the Legitimate Government has had the arduous task of taking a step forward in the fight to defend those assets of the nation and ensure that they remain in the hands of the people.
The first action to safeguard CITGO and the assets of the Venezuelan people came with the recognition of Juan Guaidó as President in Charge of Venezuela, a fact that allowed the oil subsidiary to be excluded from the sanctions and could resume its normal operations as an autonomous and independent company from Maduro’s regime. If this recognition had not occurred, CITGO would be lost today.
Other concrete actions have also been taken to ensure that Citgo remains the property of its legitimate shareholder, the Venezuelan people. In February 2019, the ad hoc board of directors of PDVSA was appointed, which in turn appointed the board of directors of PDV Holding Inc, parent company of CITGO. These appointments have not only had the approval of the National Assembly of Venezuela, but have been ratified by various courts of the United States.
Similarly, after consulting advisors and reviewing legal and financial strategies $ 71 million in interest on 2020 bonds were paid in April of this year, under the “payment under protest” mechanism, thus avoiding losing CITGO at that time, but without recognizing the legality of the debt that was not endorsed by the National Assembly. With the payment under protest, the Legitimate Government reserved the rights that it will now exercise over the non-validity of the bond and allowed it to have the necessary time to prepare the legal case.
For its part, the National Assembly and the Office of the Attorney General of the Republic, have advanced an investigation aimed at verifying the legality of the 2020 bonds that has resulted in all contracts of national public interest must have the approval of the National Assembly, something that 2020 bonds don’t have.
Likewise, the Legitimate Government has insisted on achieving an orderly and negotiated solution with the bondholders, which takes into account the objections of the National Assembly and the Complex Humanitarian Emergency that the country is experiencing.
It is worth noting that those who bought those bonds, Maduro’s bonds, did so knowing that they assumed a great risk, since the conditions of that transaction were fraudulent and illegal.
Another concrete action that the Legitimate Government has taken to protect Citgo has been the formal request that it has made since March of this year to the United States government, to revoke the General License 5 (GL5) of the US Department of Treasury, revocation that prevents CITGO from repossesed as a guarantee of the debt of the 2020 bonds.
Similarly, the Legitimate Government has a team, headed by the Attorney General of the Republic, José Ignacio Hernández, working on a range of legal options to safeguard the interests of the people, today endangered due to the negligence and irresponsibility of the usurper Maduro.
And while 50.1% of the shares of CITGO are at risk with the debt of the 2020 bonds, the remaining – 49.9% – was also given as collateral, in this case a loan of 1,500 million that Maduro obtained from the Russian oil company Rosneft in 2016.
Although the only person responsible for risking this strategic asset of the Republic is Nicolás Maduro, the Legitimate Government and the National Assembly ratify that they have made and will continue to make every effort and take all necessary measures to protect the Venezuelan oil subsidiary.
Next, a chronology of irresponsible indebtedness measures by the Maduro regime and all the actions that the National Assembly took to avoid them:
– Since 2006, Hugo Chavez’s regime promoted the irresponsible indebtedness of PDVSA, increasing Venezuelan external debt from less than 5 billion dollars in 2006 to more than 40 billion by 2012. At the same time, PDVSA production was collapsing and the daily extraction of barrels was significantly reduced.
– Although on August 4, 2016, the National Assembly approved an agreement in which it questioned the over-indebtedness of PDVSA, and demanded that the company design and implement a comprehensive plan for renegotiating its public debt, PDVSA insisted on its irresponsible indebtedness plan when it announced the exchange of 2017 Bonds for the 2020 Bond.
– Again, the National Assembly, in the exercise of its control powers, approved an agreement on August 27th of 2016, in which it rejected the offer of exchange and the issuance of the 2020 Bond and insisted that the irresponsible indebtedness of PDVSA required the integral refinancing of its external debt. It also questioned the politicization of the company that had led to the collapse of its production.
Therefore, the Assembly decided to initiate an investigation, presuming that the operation could injure public assets. In addition, It categorically rejected placing the shares of CITGO as collateral.
– Ignoring this, on September 16th of 2016, PDVSA announced its offer to redeem bonds with maturity in 2017 for more than 3,300 million dollars, issuing a new bond with maturity in 2020 guaranteed with 50.1% of shares of CITGO Holding, Inc. PDVSA justified this operation naming difficulties it presented to continue paying its financial debt.
However, the reality is that the exchange did not solve the problems of over-indebtedness and also placed CITGO at risk.
– On September 26th, PDVSA changed the terms of the exchange, to offer an additional premium to the 2017 Bond holders who decided to participate in the exchange. This decision showed that the market did not trust the operation, which increased its legal risk.
– And indeed, when on October 24th, 2016 PDVSA announced the results of the exchange, which barely covered 40% of the 2017 Bonus, it was shown that the National Assembly was right to be wary. The market did not respond favorably to the offer, as it was aware of the financial and legal risks of the operation.
– The Constitutional Chamber, managed by Maduro’s regime, published its ruling on the swap one day after the swap. Its decision n° 893, by which it prevented the National Assembly from exercising its function of comptroller over PDVSA, thus forming part of the coup d’etat continued against the Assembly.
With this decision, Maduro’s regime was able to continue the financial operation and on October 28th signed the 2020 Bond issue contract by placing 50.1% of the shares of CITGO Holding Inc. as guarantee.
As the National Assembly warned in its September 27th Agreement, the 2020 Bond is part of the irresponsible indebtedness of PDVSA and its issuance did not solve any of the structural problems that PDVSA had but instead increased its obligations.
In addition, PDVSA compromised a strategic asset of national public interest, such as CITGO, despite the fact that analysts and the market evaluated as highly probable the default of the Venezuelan debt.
– In 2017, Maduro’s regime awoke to that risk: it went into debt default, but continued with the payment of the 2020 Bond.