ConocoPhillips Sues Venezuela-owned PDVSA Over “Fraudulent” Bond Swap


ConocoPhillips’ subsidiaries have filed a lawsuit against Venezuela’s state oil company PDVSA on allegations of fraudulent operations, according to Reuters.

In a filing in a Delaware court on Thursday, ConocoPhillips said certain steps being taken by PDSVA are all part of a grand scheme to prevent it from receiving compensation in a row over the nationalization of its holdings in Venezuela by the country’s government in 2007. It cited a recent bond swap that requires using the state-owned oil company’s U.S. subsidiary Citgo Holding Inc as collateral.

Among the many operations mentioned as part of PDSVA’s ploy to circumvent paying compensation is the attempt by it to sell Citgo in 2014.

“The purpose behind each of these transfers is the same: to remove assets from the United States to Venezuela and/or to encumber assets in the United States,” the filing read, “with the intent to hinder, delay or defraud PDVSA’s and Venezuela’s arbitration award creditors, including ConocoPhillips.”

For almost 10 years, ConocoPhillips has been involved in a case against Venezuela before the World Bank tribunal known as the International Centre for Settlement of Investment Disputes (ICSID). The U.S. company is seeking billion-dollar compensation for the takeover of its assets in Venezuela by the country’s late socialist president Hugo Chavez.

The tribunal ruled in a partial decision in 2013 that the nationalization of the ConocoPhillips assets was illegal.

In a statement released on Friday, PDVSA said the lawsuit brought against it by ConocoPhillips lacks legal basis. The Venezuelan oil company claimed its bond swap was perfectly in line with the law, accusing the American oil producer of manipulated claims.

Numerous arbitration cases have been filed against the Caracas-based oil company by small and large companies in North America. Venezuela has been making effort to safeguard its assets from being impounded in any of these arbitration cases, according to ConocoPhillips.

Several weeks may be needed before a decision can be reached by the court in the latest lawsuit.

Meanwhile, PDVSA bonds experienced a sharp drop in value on Friday after it extended the deadline for its debt swap. Investors are concerned that failure by the company to prolong short-term debt maturities would eventually result in restructuring, according to Business Insider.

The decision by PDVSA on Thursday to postpone the early tender deadline for its debt swap to October 12 is considered a sign that investor response to the offer has not been impressive. The news of the ConocoPhillips lawsuit has further dented investor’s confidence.

PDVSA’s offer targets bonds maturing in 2017 and valued at $7.1 billion. The Venezuelan oil company had improved the deal last month with additional 2020 bonds which are backed with Citgo shares in swap for bonds maturing in 2017.

Venezuela has acquired a reputation of giving little information out to investors. The head of its monetary authorities, Nelson Merentes, was in attendance at an investor event put together by Deutsche Bank on Friday. But investors in attendance at the even did not succeed in extract significant information from the central bank chief.