Venezuela's opposition government escalated its efforts to protect Citgo Petroleum Corp. from seizure, seeking a U.S. court order erasing bondholders' collateral rights over the state-owned refiner and invalidating $1.7 billion in debt.
U.S.-backed opposition leaders filed a lawsuit in the U.S. District Court in New York on Tuesday claiming that bonds backed by the Houston-based, Venezuelan-owned refiner were issued illegally under President Nicolás Maduro and can't be enforced.
The complaint marks the most direct confrontation yet between the country's bondholders and opposition forces led by Juan Guaidó, who has tried for months to seize political power in Caracas.
The bonds, issued in a 2016 debt swap by state oil giant Petróleos de Venezuela SA, have clouded Citgo's future as a Venezuelan asset. They were secured by a 50.1% stake in Citgo, potentially enabling bondholders to wrest control of the company if they weren't paid.
At the urging of Mr. Guaidó's opposition, the Trump administration last week extended a three-month shield over Citgo, preventing creditors from transferring and auctioning the shares through Jan. 22. With Citgo temporarily safe from seizure, the PdVSA bondholders weren't paid $913 million they were owed on Monday.
Tuesday's complaint said the PdVSA bonds are "null and void" because they were issued without the approval of Venezuela's opposition-controlled legislature, the National Assembly. Creditors provided Mr. Maduro with "a financial and political lifeline," knowing the bonds were questionable, according to the complaint.
Bondholders include Ashmore Group PLC, BlackRock Financial Management Inc. and Contrarian Capital Management LLC. A spokesperson for the bondholders wasn't immediately available for comment. WSJ