October 15, 2019 / 9:12 PM / 9 months ago

Venezuela's opposition prepares U.S. lawsuit to defend Citgo -sources

CARACAS, Oct 15 (Reuters) - Advisors to Venezuelan opposition leader Juan Guaido within days will file a lawsuit in the United States to prevent creditors from seizing shares in U.S. refiner Citgo, which was used as collateral for a bond issued by state oil company PDVSA, according to three sources with knowledge of the plan.

The PDVSA 2020 bond is expected to go into default this month when a $913 million payment comes due, because the cash-strapped company does not have the resources to pay.

Advisors to Guaido, who has been recognized by more than 50 countries as Venezuela’s legitimate president, are preparing to ask a court to annul the bond. They argue that the government of President Nicolas Maduro did not obtain permission from the legislature to use Citgo as collateral.

“Within days we’re going to go to a court in the United States to argue that the bond is illegal,” said one of the sources, who asked not to be identified.

None of the sources elaborated on the details of the planned lawsuit or identified the court in which they planned to file it. The PDVSA 2020 bond is governed by the laws of New York, according to its prospectus.

PDVSA and Venezuela’s information ministry did not reply to requests for comment.

Venezuela’s legislature on Tuesday ratified a 2016 resolution declaring the bond null.

“We will have to make every effort to defend the most sacred interests of Venezuela,” said opposition deputy Alfonso Marquina during the session.

The resolution is the first step toward making the legal case in the United States, the three sources said.

Guaido allies appointed to control PDVSA’s overseas assets in April coordinated a $71 million interest payment on the 2020 bond. That payment may make it difficult to convince a judge that the debt is illegitimate.

Opposition leaders insist that payment does not undermine their argument that the bond is null and void.

“We paid under protest to avoid having Citgo taken away, because we were not prepared to go to trial,” tweeted Ricardo Hausmann, an economist and advisor to Guaido. “Today we are.”

Guaido has repeatedly asked Washington to step in with measures to prevent creditors from seizing Citgo. U.S. lawmakers including senators Marco Rubio and Ted Cruz last week made a similar request.

But the Trump administration has not shown interest in doing so. Conservative groups have warned this would constitute undue government interference in the economy. (Reporting by Corina Pons and Mayela Armas, writing by Brian Ellsworth; editing by Bill Berkrot)

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