October 10, 2019 / 3:04 PM / 8 months ago

Venezuela opposition may ask U.S. court to annul PDVSA 2020 bond -sources

CARACAS, Oct 10 (Reuters) - Advisers to Venezuelan opposition leader Juan Guaido are considering asking a U.S. court to annul a bond issued by state oil company PDVSA that is backed by shares of U.S. refiner Citgo, according to three sources with knowledge of the situation.

Opposition leaders say that bond, which comes due in 2020 , is illegitimate because the opposition-run congress did not give President Nicolas Maduro’s government authorization to use Citgo as collateral for the 2016 bond issue.

Guaido has been recognized by the United States and dozens of other countries as Venezuela’s legitimate president, and his allies control PDVSA’s offshore assets. But they do not have a way to make a $913 million payment that comes due this month. Failure to pay could allow creditors to seize Citgo.

“Everything indicates that (they) would go to a court in the United States to demand the annulment of the bond,” said one of the sources.

A third source said this plan was under review but that Guaido’s allies might not follow through with it.

The plan is based on a 2016 congressional resolution that said Maduro had violated the constitution by using a state-owned asset as collateral without legislative approval.

It would likely meet significant skepticism from a judge, however, because Guaido allies, who control PDVSA’s offshore assets, earlier this year made $71 million interest payment on that same bond to prevent a creditor seizure of Citgo.

Guaido’s team also held informal talks with U.S. investment fund T. Rowe Price about financing the upcoming payment, though the parties ultimately did not reach a deal. It has also requested an executive order from the White House protecting Citgo from creditors, so far without success.

The PDVSA ad-hoc board appointed by Guaido did not respond to a request for information on this case. A spokesman for Guaido did not respond to a request for comment.

PDVSA did not respond to a request for comment. Maduro retains control over the company’s operations within Venezuelan territory.

The opposition assumed control of Citgo earlier this year after Guaido, who is head of congress, invoked the constitution to declare himself interim president, arguing that Maduro’s 2018 re-election was illegitimate. (Reporting by Corina Pons and Mayela Armas, writing by Brian Ellsworth)

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