US judge approves Elliott affiliate's bid for Citgo Petroleum parent

The U.S. court on Tuesday accepted a bid of $5.9 billion from an affiliate company of Elliott Investment Management at the auction held by the court for Citgo Petroleum, clearing the path to the sale of Venezuela's PDV Holding.

Judge Leonard Stark of Delaware overruled any objections pending to the bid. He set a deadline of Friday for a report containing any other important issues that may have been overlooked. He instructed a court official overseeing the proceedings to present a proposed order for sale in time to sign by Monday. Venezuela and other parties must agree on terms.

Stark, describing the process as fair-minded and equitable, wrote that "the Amber Bid offers a combination of price and certainty in closing that is better than any other bid." This decision confirms the change from the recommendation of court officer Robert Pincus in August, after a bidding battle in the last mile, which saw new and better offers for control over Citgo, the 7th-largest U.S. refining company. Elliott's Amber Energy's bid is attractive because it offers $2.1 billion to holders of a Venezuelan defaulted bond, collateralized by Citgo equity. This payment is expected to be a major obstacle in gaining ownership of Citgo assets. In an eight-year battle, 15 creditors are fighting to recover $19 billion from Venezuela after it expropriated its assets and defaulted. Evercore, the firm that advised the court, valued Citgo as being worth about $13 billion during the auction. Venezuela, however, claims it's worth more than $20 billion.

Stark had previously denied the motions of the Venezuelan parties, Gold Reserve and two firms that advised the court regarding an alleged conflict. The Office of Foreign Assets Control, as well as other regulators, must still approve the transaction. There was no immediate indication of a time limit for the authorities to respond. Stark wrote: "If OFAC grants Amber Energy a license, and if the Court's judgement is not reversed, many judgment-creditors will finally receive relief. They have spent years and millions trying to recover billions of dollar judgments to compensate them for the harm caused by one or more Venezuela Parties decades or years ago. Gold Reserve, Siemens Energy, Consorcio Andino and Valores Mundiales creditors, Gramercy Distressed Opportunity Fund, G&A Strategic Investments and Gold Reserve tried to disqualify Amber’s bid by claiming that Pincus’ determination that Amber’s price was superior overruled the bidding procedure. In September, their motion was denied. Amber's selection means that these creditors will receive little from their claims against Venezuela, for debt defaults or asset expropriations. This is according to the priority list established by the court in order to distribute the auction proceeds. ConocoPhillips, Crystallex, and Rusoro will recover billions of dollars from the proceeds. PURSUING REFINER

Citgo Holding's parent PDV Holding, Citgo's subsidiary in Venezuela, was found responsible for Venezuela's debts. The case had been brought by Crystallex miner Crystallex against Venezuela. Since then, the Delaware court has tried to reach a settlement with creditors.

Some bidders in a heated competition focused on maximising proceeds for the Delaware 15 creditors, while others chose to reduce litigation through negotiating a payment made to PDVSA bondholders.

In September, a New York judge confirmed the validity and support of Amber's bid. Venezuelan lawyers immediately filed a court appeal. Amber Energy was the winner of the first round of bidding last year. However, its $7.3 billion conditional offer was rejected most creditors. This led to the need for a new round this year with a different set rules in order to encourage competition. Citgo Petroleum in Houston, Venezuela's crown jewel, cut ties with PDVSA after U.S. sanctions. The auction has been rejected by both the Venezuelan government of President Nicolas Maduro and his political opponents. (Reporting and editing by Nathan Crooks, Lisa Shumaker and Marianna Pararaga in Houston)

(source: Reuters)