CARACAS (Reuters) – Citigroup Inc plans to sell several tons of gold placed as a guarantee by the central bank of Venezuela on a loan of 1.6 billion dollars after the repurchase term expires this month, sources said, a joke d & # 39; arrest for the efforts of President Nicolas Maduro restrictive country reserves.
FILE PHOTOS: A Citibank signs on a bank branch in downtown Manhattan, New York, November 17, 2010. REUTERS / Mike Segar
Since 2014, Maduro's government has used the financial operations known as gold swaps to use its international reserves to gain access to cash after a decline in oil revenues has struggled to obtain hard currency.
In the last two years, however, he has struggled to recover his guarantee.
According to the terms of the 2015 agreement with Citibank's Citibank, Venezuela would have to repay $ 1.1 billion of the loan on March 11, according to four sources aware of the situation. The rest of the loan will come next year.
Citibank expects to sell the gold held as collateral – which has a market value of around $ 1,358 billion – to recover the first tranche of the loan and deposit the excess of about $ 258 million in a bank account in New York, two of the sources said.
The ability of Maduro's government to repay the loans was complicated by the tremendous economic situation in the South American country and by the financial sanctions imposed by the United States and some European nations.
Most Western nations say that the re-election of Maduro at the age of six last year was marred by fraud and recognized the leader of the opposition Juan Guaido as the legitimate president of Venezuela.
Guaido invoked the constitution of Venezuela to announce an interim presidency in January. However, Maduro retains control over state institutions in Venezuela and has the support of the powerful military. He branded Guaido like a puppet from the United States.
With Washington's support, Guaido's team took control of the state-owned oil company PDVSA, the refining subsidiary in the United States, but the attempt to negotiate a 120-day extension of the repurchase term for the guarantee does not have had success, the sources said.
"Citibank was told that there was a force majeure event in Venezuela, so the grace period was necessary, but they did not grant it," said one of the sources, which belongs to Guaido's team.
A source in the Venezuelan government that is familiar with the issue has confirmed that the country's central bank has not transferred the money to Citibank this month.
Citigroup declined to comment. The Venezuelan Central Bank did not immediately respond to a request for information.
In a report presented to the US securities regulator in February, Citibank stated that the Central Bank of Venezuela had agreed four years ago to repurchase in March 2019 a "significant volume of gold" as part of a signed contract to obtain $ 1 , 6 billion. Citibank said that, following the transaction, he owned the gold.
Guaido is attempting to freeze bank and gold accounts owned by Venezuela abroad, many of which remain in the Bank of England. At the end of 2018, the Central Bank paid the investment bank Deutsche Bank AG about $ 700 million to recover ownership of a portion of gold used as collateral for a loan.
However, the ingot remained in the custody of the Bank of England, despite the Central Bank's request to repatriate. In light of this transaction, the sources said there was no incentive for the Central Bank to repay Citibank. REJECTED DEBT
Guaido's team also started preparing this month for a possible debt restructuring in an attempt to lighten payments and stop any hostile action by creditors, two sources who took part in the discussion said.
In meetings between members of Guaido's team with legal advisors in the United States, there were discussions about the start of negotiations soon not only with Venezuelan bondholders, but also with Chinese and Russian governments and companies affected by a Wave of nationalizations.
"We want to tackle debt globally. We calculate it amounts to $ 200 billion," one of the sources said.
The Citgo refining unit, Venezuela's main resource abroad, is under control because it acts as a guarantee for the issuance of a PDVSA bond and a loan from the Russian oil company Rosneft.
Guaido's consultants are also considering paying in the coming weeks about $ 72 million in interest payable on the 2020 PDVSA bonds to avoid any action by creditors against Citgo.
Reporting by Corina Pons and Mayela Armas; Written by Daniel Flynn; Editing by Lisa Shumaker