Gold Reserve, a bidder for Citgo, is happy with the refinery's management

Gold Reserve executives said that they were pleased with Citgo Petroleum management's performance on Thursday. This could be a sign of top executives staying at the Venezuelan-owned U.S. refining company if the bid of a Gold Reserve division for its parent was approved by an American federal judge.

Last week, a court official overseeing an auction of shares recommended a $7.4 billion offer by Gold Reserve’s Dalinar Energy Corporation.

Delaware Judge Leonard Stark will soon decide if it is approved, despite opposition from creditors and other bidders.

The offer, if confirmed, is expected to result in a change of ownership for the seventh-largest refiner in the United States after an eight-year legal case brought by companies looking to recover up $19 billion as compensation for losses caused by Venezuela's defaults on debt and expropriations.

In a conference to discuss the details of Gold Reserve's bid, Paul Rivett said, "We are very comfortable with management."

We'd love to have a meeting with the management now, if we can get regulatory approval and court approval. He added, "They've done a very good job in the circumstances."

Citgo, a Houston-based company, has been combining Venezuelan and U.S. executives in its management and board for many decades.

In 2019, a Venezuelan congress that was controlled by the opposition allowed the refiner to cut ties with its ultimate parent PDVSA. This company is controlled by Nicolas Maduro's socialist government. Citgo's chief executive, Carlos Jorda and several boards which continue to supervise the refiner were appointed by that congress.

Gold Reserve, however, said that the board of U.S. based Dalinar, which was created by the miner in order to participate in the bid round and ultimately take over Citgo will be "exclusively made up of American citizens." Gold Reserve will also hold at least 85% voting shares and 44% equity of Dalinar.

The Gold Reserve Group's bid includes $4.5 billion in bridge loans to finance a part of the purchase price, and a $2 Billion revolving loan that can be used once the deal is closed.

In an objection filed in Delaware earlier this week, large creditors, such as oil producer ConocoPhillips, and miner Crystallex have expressed doubts regarding the strength of Dalinar’s financing.

Some critics have pointed out that the financial structure proposed by Dalinar, which doesn't include an agreement with holders of a Venezuelan bond secured with Citgo equity but does not pay them, could be susceptible to court challenges from the holders.

Gold Reserve's bid must also be approved by Treasury Department of the United States, which has shielded Citgo from creditors for recent years. The department must provide guidance to Gold Reserve by July 17. (Reporting and editing by Marianna Pararaga)

(source: Reuters)