Citgo Bidding Opened to Others to Try to Top Elliott Firm

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(Bloomberg) — A U.S. judge has reset the bidding process for Citgo Petroleum Corp.’s parent company. Late Tuesday, a move that would create competition for Elliott Investment Management’s bid to buy the oil refining company.

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Judge Leonard Stark ordered bidding reopened for the company, allowing new bids to be submitted. Any bid would have to top the $7.3 billion bid made by an Elliott affiliate earlier this year.

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Stark, who heard arguments on the matter on December 13 in Wilmington, Delaware, has now cleared the way for other creditors – including Gold Reserve and Crystallex International Corp. and Red Tree Investments LLC.

The decision puts a new twist in a years-long legal battle over control of Citgo’s parent company, a Venezuelan-owned foreign asset that operates three U.S. refineries, pipelines, terminals and fuel distribution channels. The proceeds from the sale will repay a long list of creditors who collectively owe about $20 billion to the Venezuelan government and the state-owned oil company, Petroleos de Venezuela SA, due to the confiscation of assets in the country.

Crystallex, which saw its Venezuelan gold mines seized by the late President Hugo Chavez, is first in line to get a big slice of the proceeds. Other companies include ExxonMobil, ConocoPhillips, and Siemens AG.

Stark, who authorized the auction to take place last year, had hoped to complete the sale of the parent company, PDV Holding, by the end of the year.

In his ruling Tuesday, he set a new hearing on the sale for late July in Wilmington.

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Creditors’ response

Stark ordered an additional marketing period to begin as soon as possible. Evercore Inc. will review and evaluate “whether to contact other parties that may be interested in participating in the sale,” Stark wrote in Tuesday’s ruling.

The changes come after special educator Robert Pincus, who was hired by Stark to run the auction, urged a judge to reform the process after some creditors criticized it as lacking transparency and unfairly favoring the bid made by Elliott’s Amber Energy Inc. It must be restructured, as creditor resistance increases.

Stark found that court officials improperly denied access to information about Amber Energy’s bid and Citgo’s financial health to creditors considering the bid. He also indicated that he was disappointed with the amounts generated by the bidding, which would leave the claims of many creditors unsatisfactory.

The sale is at a turning point, as Stark seeks to maximize revenue for creditors, some of whom have filed separate lawsuits seeking their money back in courts outside Delaware. These issues have added another layer of legal risk for any potential buyer.

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Chavez, who was first elected in the late 1990s, nationalized major industries as part of a socialist agenda during his 14-year rule. He died in 2013 and was succeeded by Nicolas Maduro. The affected companies, which also include holders of other types of debt, have obtained and filed judgments in Delaware in hopes of winning compensation.

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A World Bank arbitration panel in 2016 found that Venezuela owed Crystallex $1.4 billion, of which it is seeking to recover about $1 billion. A pair of Exxon’s oil projects were seized in 2007, and the company is seeking claims worth $984 million.

Citgo processes more than 800,000 barrels of oil per day and is the seventh-largest refiner in the United States.

The case is Crystallex International Corp. v. Bolivarian Republic of Venezuela, 17-mc-00151, U.S. District Court, District of Delaware (Wilmington).

(Updates with details begin in the eighth paragraph.)

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