Citgo to Boost Loan to $1.8 Billion on Strong Demand

(Bloomberg) -- A power struggle is raging in Venezuela and its oil company is crippled by sanctions. But money managers are lining up to lend to the nation’s U.S. refining unit.

Houston-based Citgo Petroleum Corp. has received so much demand for a new loan that it plans to increase the offering by $600 million, bringing the total to $1.8 billion, according to people with knowledge of the matter. The extra money will allow the company to refinance a term loan maturing in 2021, on top of the bank lines due this year that it had already planned to replace, said the people, who asked not to be identified because the discussions are private.

The loan offering comes at a critical time for Venezuela, which sits on the largest oil reserves in the world, and for Citgo. Dozens of countries recognize the nation’s opposition leader, Juan Guaido, as Venezuela’s legitimate president, leading to a power struggle with embattled incumbent Nicolas Maduro. Guaido has appointed new boards of directors for Citgo and its state-owned parent company Petroleos de Venezuela SA.

The loan will mature in three years, instead of the originally planned five, one of the people said. Investors had been guided to expect a coupon of between 4.5 and 5.5 percentage points above the Libor rate for the $1.2 billion five-year loan previously contemplated.

Citgo hired Houlihan Lokey Inc. to arrange the new loan after a group of lenders led by Deutsche Bank AG that was involved in the maturing debt expressed reluctance at rolling over their exposure, Bloomberg previously reported. Cantor Fitzgerald has been hired as the new loan’s administrative agent, a role that was previously held by Deutsche Bank and which involves handling interest payments and represent lenders in dealings with the company.

A spokeswoman for Cantor confirmed the firm’s role. A spokesman from Houlihan Lokey declined to comment, while Citgo didn’t respond to requests for comment.

To contact the reporters on this story: Davide Scigliuzzo in New York at dscigliuzzo2@bloomberg.net;David Wethe in Houston at dwethe@bloomberg.net

To contact the editors responsible for this story: Nikolaj Gammeltoft at ngammeltoft@bloomberg.net, Dan Wilchins

©2019 Bloomberg L.P.