Elliott Affiliate’s $6 Billion Citgo-Shares Bid Wins Auction
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An affiliate of Elliott Investment Management has won a court-ordered auction for control of the parent company of U.S. oil refiner Citgo Petroleum Corp., Venezuela’s most valuable foreign asset.
U.S. District Judge Leonard Stark in Wilmington, Delaware, said Tuesday he would adopt a special master’s recommendation that Amber Energy’s $5.89 billion bid was the highest and best bid produced by the lengthy bidding process for shares held by Citgo’s U.S. parent company, bringing the case closer to conclusion after eight years of litigation.
“The Amber offer offers the best overall combination of closing certainty and price of any offer submitted,” Stark said in his 162-page decision. “Amber’s proposal is neither grossly inadequate nor manifestly unfair and therefore should be approved,” he wrote. The refinery is a subsidiary of PDV Holding, which is owned by Venezuela’s oil company, Petroleos de Venezuela SA.
PDVSA bonds due in 2020, backed by shares of a PDV Holding subsidiary, rose following the news and traded slightly above average. According to the filing, debt holders will be paid through an agreement with Amber, under which investors will surrender their liens against the company in exchange for $1.68 billion in cash at the end of the sale.
In a statement, Amber said it was “committed to partnering with CITGO team members to build on its historical foundations and further strengthen CITGO as a leader in the refining, transportation and marketing of products vital to the U.S. economy.”
Venezuelan creditor Gold Reserve Ltd., which is suing the country to expropriate its mining assets, made a revised offer of $7.9 billion but left out bondholders.
Representatives Gold Reserve did not immediately respond to a request for comment on Stark’s decision. A New York federal judge confirmed the validity of these PDVSA bonds, increasing the odds that Amber will walk out the winner. The Gold Reserve argued that the bondholders had no valid claim.
While Stark supported Amber’s bid, he also gave bidders until Nov. 28 to submit final objections to the bid before issuing the final sale order.
Citgo operates refineries, pipelines, terminals and fuel distribution channels in the United States. PDVSA on the ground is controlled by Venezuelan President Nicolas Maduro, although PDV Holding is under the control of the South American nation’s political opposition. The opposition is representing PDVSA in US courts because the US does not recognize Maduro.
The process did not proceed without controversy. Gold Reserve attempted to disqualify the judge and private master, claiming they unfairly favored Amber. Gold Reserve claimed the process was skewed because consultants from private law firm Weil, Gotshal & Manges and investment bank Evercore Inc. acted on behalf of Elliott and its affiliates on other matters. Amber and the private master denied any conflict or favoritism.
Stark refused to disqualify himself or Private Master Robert Pincus, the former Skadden Arps attorney he appointed to oversee the auction.
It’s the latest development in a years-long legal battle over Venezuela’s largest foreign asset. Among them are Canadian miner Crystallex International Corp. A long list of creditors, including U.S. driller ConocoPhillips Co. and U.S. driller ConocoPhillips Co., have been lining up for years to get compensation from the sale of Citgo. Some are trying to recoup losses from the nationalization of their assets in Venezuela by the late President Hugo Chavez, whom Maduro succeeded in 2013.
The case is Crystallex International Corp. v. Bolivarian Republic of Venezuela, 17-mc-00151, U.S. District Court, District of Delaware (Wilmington).
–With help from Sabrina Willmer.
(Updates with details regarding PDVSA bonds auctioned in fourth paragraph)
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