CARACAS, Venezuela -- Venezuela has called off the sale of its Citgo Petroleum Corp., and the U.S.-based oil refiner instead plans a debt sale that would raise funds for the cash-strapped country, reported The Wall Street Journal.
Although several suitors submitted bids in early December, the country scrapped the auction in recent days, people familiar with the matter told the newspaper. CITGO is now planning to raise $2.5 billion in debt instead, one of the people said.
CITGO had revenue of $42.3 billion and earnings before interest, taxes, depreciation and amortization (EBITDA) of $1.8 billion in 2013, according to July debt-offering documents cited by the paper. It owns refineries in Lake Charles, La., Corpus Christi, Texas, and Lemont, Ill., which have a combined processing capacity of about 760,000 barrels a day. The company also owns valuable networks of pipelines and fuel-distribution terminals in the eastern United States.
About 5,600 independently owned U.S. gas stations and convenience stores carry the CITGO brand at retail.
Venezuela enlisted investment bank Lazard last year to shop CITGO. The auction continued in December despite mixed signals from Caracas that cast doubt on its intentions.
Analysts and people close to the sales process said that they had expected CITGO to fetch between $8 billion and $11 billion if sold.
But running a successful auction of a state-owned enterprise amid plunging oil prices was an uncertain prospect to begin with, and such deals usually take many months to be inked and closed, said the report. The debt sale, on the other hand, could serve as a more immediate source of cash for the country, it said.
The auction drew interest from U.S. refiners Marathon Petroleum Corp. , HollyFrontier Corp. and Valero Energy Corp. , as well as private-equity firms TPG and Riverstone Holdings LLC., which teamed up to bid, people familiar with the process told the Journal.
The sale process could be restarted later. Corporate auctions are rare in the immediate aftermath of such recapitalization deals, however, and the added debt could make the company less attractive to suitors, the report said.
CITGO has tapped Deutsche Bank to sell the new debt through a term loan and high-yield bonds that would allow the refiner to pay a dividend to its owners, according to the person familiar with the matter. Such a payout would be the company's second in the last year after CITGO in July sold $650 million of bonds in part to pay its owner a $300 million dividend.
Houston-based CITGO is owned by Petróleos de Venezuela SA (PDVSA), the state-owned oil company that is Venezuela's main source of cash.
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