CITGO to Discuss Offers with Investors in Upcoming Share Auction

Venezeula's US-based Oil Refiner CITGO Heads for Auction

Caracas, April 1, 2024 (our website) - The court-ordered sale of Venezuela's prized foreign asset, CITGO, is stepping up a gear. Potential buyers will soon have access to the company's financial and operational data as part of the auction proceedings.

Reuters reports that the international arbitration awards have given corporations the green light to collect on debts. This is all thanks to the so-called "alter ego" rulings, which declare Venezuela and state oil company PDVSA as the same entity, making PDVSA responsible for Venezuela's debts.

Back in October 2022, Delaware District Judge Leonard P. Stark began the auction of CITGO's parent company, PDV Holding (PDVH). The aim? To satisfy the numerous international arbitration awards.

The Canadian miner Crystallex secured the first favorable alter ego decision in 2019. Judges have consistently upheld this verdict. Other firms, like ConocoPhillips and O-I Glass, have jumped on board the court-mandated sale too.

In total, 18 corporations have claims worth a whopping $21.3 billion attached to the Delaware court-ordered proceedings. This far exceeds CITGO's present valuation of $13 billion.

With data rooms now open, interested parties are getting a second round to make binding offers. Investment bank Evercore has been hired by the court to oversee the process. The auction is expected to wrap up in mid-2024.

Sources suggest the first round saw no bids over $7.3 billion. This was after Stark ruled out the establishment of a "stalking horse" minimum price. The current CITGO board has proposed a $10 billion payment, but they do not answer to any legitimate Venezuelan authority. Instead, they've been appointed by Juan Guaidó and kept in place by a defunct, US-backed parliament.

Crystallex ($1.0 billion), TIdewater ($80 million), ConocoPhillips ($1.4 billion), and O-I Glass ($700 million) stand at the top of the list for payouts, based on when they had their writs approved. ConocoPhillips is chasing an additional $8.5 billion award from the World Bank's International Centre for Settlement of Investment Disputes (ICSID).

While the award has accrued over $1.7 billion in interest, it remains under appeal at ICSID. However, ConocoPhillips has won a default ruling to enforce the award, with lawyers representing the Guaidó parallel administration failing to appear in court. In late 2023, Judge Stark dismissed efforts to keep the oil giant from attaching the claim to the ongoing auction.

Rumors swirl that ConocoPhillips is considering using its combined claims as a bid. This could cause disputes among claimants who won't be paid if credit bids or offers below the total liability amount are accepted.

Besides the international arbitration awards, CITGO also owes holders of the defaulted PDVSA 2020 bond. This bond has 50.1 percent of the company's shares pledged as collateral. Successive US Treasury orders have prevented bondholders from seizing collateral. Expectations are that they'll proceed once the auction share concludes, and CITGO changes ownership.

The Nicolás Maduro government has repeatedly denounced the "theft" of Venezuela's US-based refiner and vowed to take "political, diplomatic, and judicial" actions to defend the country's interests.

CITGO operates refineries in Illinois, Louisiana, and Texas, as well as a network of over four thousand gas stations. Before Washington's sanctions and the opposition taking over the enterprise, it used to return as much as $1 billion in yearly dividends to Caracas.

Insights:- Red Tree Investments, a subsidiary of Contrarian Capital Management, has been approved as the stalking horse bidder by the U.S. District Court for the District of Delaware with a bid of $3.7 billion in cash and non-cash considerations. This bid sets the floor for the auction’s Topping Period, a designated window during which other bidders can submit higher offers before the final sale hearing.- Competing bids, such as a $7.1 billion offer from a consortium led by Gold Reserve Ltd., have been overruled by the court due to legal concerns, specifically the complications posed by PDVSA bond litigation.- Other parties, like trading giant Vitol, have reportedly submitted stalking horse proposals, though the bids' details and court recognition remain less clear.

All interested parties, including the potential buyers of CITGO, are examining the financial and operational data of the company in relation to the upcoming auction in the business and finance sector. The court-recognized stalking horse bidder, Red Tree Investments, has put forth a $3.7 billion offer, setting the floor for other bidders in the auction.