Citigroup to Sell Venezuelan Gold After Maduro Fails to Repay Loan

Venezuela will lose access to even more of its gold, after failing to repay a loan given to them by Citigroup:

Citigroup Inc plans to sell several tons of gold placed as collateral by Venezuela’s central bank on a $1.6 billion loan after the deadline for repurchasing them expired this month, sources said, a setback for President Nicolas Maduro’s efforts to hold onto the country’s fast-shrinking reserves.

Maduro’s government has since 2014 used financial operations known as gold swaps to use its international reserves to gain access to cash after a slump in oil revenues left it struggling to obtain hard currency.

In the past two years, however, it has struggled to recover its collateral.

Under the terms of the 2015 deal with Citigroup’s Citibank, Venezuela was due to repay $1.1 billion of the loan on March 11, according to four sources familiar with the situation. The remainder of the loan comes due next year.

Citibank plans to sell the gold held as a guarantee - which has a market value of roughly $1.358 billion - to recover the first tranche of the loan and will deposit the excess of roughly $258 million in a bank account in New York, two of the sources said.

The ability of Maduro’s government to repay the loans have been complicated by the South American country’s dire economic situation as well as financial sanctions imposed by the United States and some European nations.

…

Guaido is attempting to freeze bank accounts and gold owned by Venezuela abroad, much of which remains in the Bank of England. At the end of 2018, the Central Bank paid investment bank Deutsche Bank AG about $700 million to recover ownership of a portion of gold used as collateral for a loan.

However, the bullion remained in the custody of the Bank of England, despite the Central Bank’s request to repatriate it. In light of that transaction, the sources said there was no incentive for the Central Bank to repay Citibank.