Court Approves Elliott Bid for Citgo

GDRZF -7.97%

Delaware judge Leonard Stark has approved Elliott Management’s bid for Citgo, the U.S. refining arm of Venezuela’s PDVSA. Parties involved have until Monday to agree on a sale order—including Venezuela.

“The Amber Bid offers the best overall combination of price and certainty of closing of any bid submitted,” Judge Stark wrote, as cited by Reuters.

Amber Energy, an affiliate of the activist investor fund, emerged as a frontrunner in the Citgo auction in August, when it presented a bid that offered $5.86 billion to PDV Holding creditors plus another $2.86 billion in settlements for claims made by the holders of a bond, on which PDV Holding’s parent, Venezuela’s PDVSA, defaulted.

A rival bid, supported by the court officer on the case, was made by a consortium led by mining company Gold Reserve. That bid was for $7.4 billion, significantly above the Amber Energy bid and even higher than the floor price set by the court, which amounted to $3.7 billion.

Gold Reserve’s lawyers called the Elliott bid a back-room carve-up that diverts billions from legitimate judgment creditors to bondholders still fighting over the validity of their notes in a New York court.

Gold Reserve itself last month asked the court for a stay in the auction process, and lawyers representing the Venezuelan refiner’s parent company, PDV Holding, protested the size of the favored bid made by Amber Energy. The sum offered was “so low it shocks the conscience,” they said in late October. Now, it has stated that it disagrees with Judge Stark’s decision.

The auction, Gold Reserve said, “was plagued with significant conflicts of interest, including the $170 million in fees collected by the special master's advisors from affiliates of Elliott and the 2020 bondholders involved in Elliott's bid.”

The proceeds from the sale would go towards compensating 15 creditors who have been looking for ways to recoup their losses incurred from Venezuela’s nationalization drive under Hugo Chavez, and debt defaults over the period since 2017. The total that creditors are asking for is $19 billion.

By Charles Kennedy for Oilprice.com

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