Mark Your Calendars -- Halloween For Citgo -- September 12, 2020

This is absolutely fascinating.

Citgo.

Link here.

Venezuela's crown jewel, Citgo, is controlled by "mainstream opponents" of Venezuelan president Nicolas Maduro. These "mainstream opponents" have controlled Citgo since early 2019.

Citgo is in default of a 2020 bond.

• the 8.5 percent interest bond matures on October 27, 2020
• bondholders are owed just less than $2 billion on that date
• bondholders include Ashmore, Fidelity, T Rowe Price, and others
• the bond's collateral: 50.1% ownership of Citgo

Citgo and its "owners" appear to be in default to the tune of $914 million due a year ago, October. The foreclosure has been put on hold through legal maneuvers extending the deadline every ninety days.

Citgo and its "owners" argue the bond should be invalidated because it was never approved by the National Assembly in Caracas --

• that argument has gained no traction:
• besides being outright theft, it would set a precedent for other foreign issuers to walk away from their US obligations based on political changes at home

Then, a lot of legalese and lot of politics.

Due to the presidential election, the "suspension" preventing foreclosure is likely to be renewed for another ninety days. But by January, 2021, the issue will have lost its campaign values, making it easier for bondholders to foreclose on Citgo.

Two other players, Crystallex and COP are in the mix, but both seem in a less advantageous position than the bondholders. 

At the end of the day, this is as much a political story (and the likely end of Maduro's opposition (Juan Guaido) as a financial story. 

My hunch: a clever judge will thread the needle.