FILE PHOTO: General view of Citgo Petroleum facilities in Texas. - Reuters
NEW YORK: An Elliott Investment Management affiliate emerged as the recommended bidder in the court-ordered auction of Citgo Petroleum Corp’s parent, offering US$5.89bil and a deal to pay off bondholders that have a pledge on the asset.
On the other side of the legal fight was Gold Reserve Ltd, a Venezuelan creditor suing the country for the expropriation of its mining assets.
The firm was also offering to buy US-based PDV Holding, Citgo’s parent, in a proposal that would exclude bondholders. Gold Reserve said in a statement the revised offer was US$7.9bil.
The standoff reached a tipping point when the court-appointed special master, Robert B. Pincus, told the court that Gold Reserve’s improved offer didn’t “match or exceed” the deal presented by Amber Energy Inc, the investment management affiliate.
“The Amber sale transaction continues to constitute a superior proposal, provides adequate value to holders of attached judgments under Delaware law, and remains the best bid received in this sale process,” the special master said in a court filing dated last Friday.
Gold Reserve said on Saturday it intended to object “vigorously” to the special master’s recommendation.
The sale hearing is scheduled to begin on Sept 15 in US District Court in Delaware, with Judge Leonard Stark expected to decide on the winning bid.
That would mark the culmination of a years-long legal battle to seize the company by Venezuelan creditors to collect more than US$20bil in claims for expropriations and unpaid debts.
The special master’s decision signalled that he’s prioritising the chances of closing the deal over the purchase price.
Amber’s bid, Pincus wrote, “virtually eliminates any closing risks” that could result from bondholder litigation and can close regardless.
The bonds were issued by Venezuela’s state-owned oil company, Petroleos de Venezuela SA, and defaulted in 2020.
As collateral for the notes, the firm had pledged a controlling stake of Citgo Holding, a subsidiary of PDV Holding. That debt’s validity is being challenged in a New York court, with a judge’s decision expected within weeks.
Regardless the outcome of that lawsuit, Amber is offering a US$2.1bil deal to settle the notes, a price that Pincus said represented an US$895mil discount on the full claim.
Gold Reserve proposed a competing deal with bondholders, but the special master expressed “material reservations” with the plan to address that risk and cautioned the court against relying on the company’s “uncertain financing.”
The Gold Reserve bid that “may not be able to close and may require re-solicitation of bids at a significantly depressed level, or an Amber bid that discharges US$5.892bil of attached judgments, has a high degree of closing certainty, and secures an US$895mil discount on the PDVSA 2020 Bondholders’ claims,” Pincus said.
“Faced with these choices, the special master concludes that the Amber sale transaction is the best bid for the PDVH shares.” — Bloomberg
