Guaido's Legal Adviser in Talks With Citi to Extend Gold Swap

(Bloomberg) -- The top legal adviser for Venezuela's Juan Guaido said he's held talks with Citigroup Inc. bankers this week to extend the terms of a $1.1 billion gold swap originally signed by Nicolas Maduro's government that matures early next month.

Jose Ignacio Hernandez, newly appointed as attorney general for Guaido's growing parallel government, said that he expects an agreement “very soon” with the New York-based bank. Guaido, from his position as head of the National Assembly, is trying to identify and protect Venezuelan assets abroad from being squandered under the embattled Maduro regime.

“The extension of the terms is one of the options that we have discussed,” Hernandez said in a telephone interview from Boston. “We will make a purely economic decision, based on the objective of protecting the interests of the state.”

Reaching a deal is complicated given the legal issues involved. More than 50 countries, including the U.S., recognize Guaido as the rightful leader of Venezuela even as Maduro continues to rule from the presidential palace and command the state oil company and military. The deal between the central bank and Citigroup dates back to 2015 and involved $1.6 billion of gold held at the Bank of England as collateral for a loan. The opposition is lobbying Citigroup to not take control of the physical gold even with Maduro unlikely to pay under the terms of the agreement.

In a filing last week, Citigroup said a subsidiary had bought the precious metal up front, taking full legal ownership under a contract that requires Venezuela's central bank to periodically buy back portions at predetermined dates. Citigroup has also been meeting with U.S. Treasury officials to avoid potentially violating any U.S. sanctions, according to Senator Marco Rubio.

Daniel Diaz, a spokesman for Citigroup, declined to comment. While last week's filing didn't specify how much of the original $1.6 billion contract is still outstanding, it described next month's payment as “significant.” The amount maturing on March 11 is $1.1 billion, according to a government official, who asked not to be identified speaking about a private transaction. Another portion would be due at a later date, the person said.

Venezuela's central bank didn't immediately reply to a request for comment on the deal.

Hernandez is currently prioritizing Venezuela's most important legal battles, including the ongoing fight for control of state-run oil firm Petroleos de Venezuela SA's refining arm in the U.S., Citgo Petroleum. Here are some things he mentioned as key to Guaido's legal strategy in the U.S.:

• An agreement on the new Citgo board was introduced in Delaware last week as part of the new board appointments of PDV Holding Inc. Legal steps to modify the statutes of the new appointments have been made.
• The Citgo board took formal control of the company last Friday, and “there are no longer ties with the Maduro government,” he said.
• Citgo's liabilities will be urgently addressed because of risks they pose to its operations.
• The trust PDVSA created to pursue a lawsuit against international oil traders, represented by attorney David Boies, was declared void by the National Assembly in 2017. Details on how to plan to proceed with the case will soon be announced at a Florida court.
• Venezuela's arbitration case with Rusoro Mining Ltd. will be dealt with “urgently.”

--With assistance from Jenny Surane and Andrew Rosati.

To contact the reporters on this story: Patricia Laya in Caracas at playa2@bloomberg.net;Fabiola Zerpa in Caracas Office at fzerpa@bloomberg.net

To contact the editors responsible for this story: Daniel Cancel at dcancel@bloomberg.net, Brendan Walsh

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