According to papers released late Friday, an Elliott Investment Management affiliate has emerged as the preferred winner in the long-running US court-supervised auction of shares in Citgo Petroleum’s parent company.
Robert Pincus, the court-appointed officer monitoring the process, supported Elliott’s Amber Energy unit’s $5.89 billion offer, despite a competing bid from mining business Gold Reserve with a higher headline value.
The Delaware court-run auction is intended to settle creditors’ claims for restitution of assets expropriated by Venezuela and debts that have gone unpaid for nearly a decade.
If upheld, the recommendation would be a significant step toward resolving problems involving Citgo, the Houston-based refiner long regarded as Venezuela’s most valuable foreign asset.
The bidding race tightens in the last stage.
The battle heated up in the auction’s final days, fuelled by decisions in linked legal cases that drove bidders to revise their offers.
Judge Leonard Stark of the United States District Court in Delaware is likely to reach a final decision during a hearing set for next month.
Amber Energy’s proposal was ruled better earlier this month, prompting the court to grant Gold Reserve’s subsidiary, Dalinar Energy, three days to try to match.
Pincus’ most recent disclosure stated that Dalinar’s amended $7.4 billion submission “did not match or exceed” the Elliott-backed transaction. As a result, he confirmed Amber’s status as the frontrunner.
While acknowledging the Gold Reserve effort, Pincus stated that the court reserves the right to request a new review if “intervening events” occur before Stark issues a ruling.
Distribution of proceeds at stake
Auction proceeds are targeted at a $19 billion group of 15 creditors who have been chasing claims since 2017.
In filings shown in the Amber case, it appears they bid to cover only nine of these creditors, compared with 12 in Gold Reserve’s package.
However, Amber’s offer has its own unique financial deal. It has a separate settlement with over 75% of holders of a defaulted Venezuelan bond linked to Citgo equity, for $2.13 billion in cash.
That side deal could facilitate the unwinding of a large percentage of claims directly related to Citgo’s ownership structure.
Furthermore, Amber has provided the amount of $500 million to Gold Reserve as a partial payment against its expropriated mining properties based in Venezuela.
The filings showed Gold Reserve has not agreed to such an arrangement.
Challenges to the recommendation
Amber’s nomination has been questioned. Gold Reserve, along with creditors Siemens Energy, Consorcio Andino, and Valores Mundiales, filed petitions this week to invalidate Amber’s proposal.
According to the lawsuit, Pincus violated established bidding procedures by judging that Amber’s price was superior.
These motions are still being reviewed, and they may have an impact on how the court handles the final approval process. If successful, they may reopen consideration of competing offers or change the structure of remuneration.
Broader implications for Venezuela’s creditors
The Citgo auction is part of one of the largest enforcement drives against Venezuela in US courts since the extensive defaults and expropriations by the country in the middle of the last decade.
From energy firms to bondholders, creditors have grabbed at Citgo’s value as a source to retrieve losses.
In addition to resolving the question of who will own Citgo, the Delaware proceedings will also decide what role American courts will play when it comes to the topic of asset seizures and defaults related to a sovereign.
Amber’s bid seeks to balance competing claims through how payments to bondholders and other creditors are structured.
The eventual decision from Judge Stark next month will be the key.
In the interim, however, the auction remains an area of ongoing dispute between creditors, investors a nd opposition political parties in Venezuela that have battled to keep control of the refiner while fighting off claims from a wide range of claimants.
At least for the moment, Elliott’s Amber Energy is in line to be declared the winner to obtain control of Citgo’s parent, subject to court approval.
The post Elliott Affiliate recommended as winner in $5.89 billion Citgo auction appeared first on Invezz