Elliott Affiliate’s $6 Billion Citgo-Shares Bid Wins Auction
(Bloomberg) --
An affiliate of Elliott Investment Management won a court-ordered auction for control of the parent company of US oil refiner Citgo Petroleum Corp., Venezuela’s most-valuable foreign asset.
US 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 generated by the lengthy auction process for shares held by Citgo’s US parent, moving the case closer to conclusion after eight years of litigation.
“The Amber bid offers the best overall combination of price and certainty of closing of any bid submitted,” Stark said in his 162-page decision. “The Amber bid is neither grossly inadequate nor manifestly unjust and therefore should be” approved, he wrote. The refiner is a subsidiary of PDV Holding, owned by Venezuela’s oil firm Petroleos de Venezuela SA.
PDVSA bonds due in 2020, which are backed by shares in a PDV Holding affiliate, ticked higher after the news, trading slightly above par. Holders of the debt will be paid off through a deal with Amber, in which investors will release their pledge against the company in exchange for $1.68 billion in cash at the closing of the sale, according to the filing.
Amber said in a statement it’s “committed to partnering with Citgo team members to build on its historic foundation and further strengthen Citgo as a leader in the refining, transportation, and marketing of products vital to the US economy.”
Gold Reserve Ltd., a Venezuelan creditor suing the country for the expropriation of its mining assets, made a revised offer of $7.9 billion, but left out the bondholders.
Representatives Gold Reserve didn’t immediately respond to a request for comment on Stark’s ruling. The opposition-led PDVSA ad hoc board, which represents the company in US courts, issued a statement calling sales process “defective” and saying it will continue to defend its assets in accordance with the law.
A New York federal judge has confirmed the validity of those PDVSA bonds, making it more likely Amber would walk away the winner. Gold Reserve has argued bondholders don’t have a valid claim.
While Stark backed Amber’s bid, he also gave bidders until Nov. 28 to submit any last objections to the offer before issuing a final sale order.
Citgo operates refineries, pipelines, terminals and fuel-distribution channels in the US. PDV Holding is under the control of the South American nation’s political opposition, though PDVSA on the ground is controlled by Venezuelan President Nicolas Maduro. The opposition represents PDVSA in US courts, because the US doesn’t recognize Maduro.
The process hasn’t come without controversy. Gold Reserve tried to disqualify the judge and the special master, claiming they unfairly favored Amber. Gold Reserve claimed the process had been skewed because advisers to the special master — law firm Weil, Gotshal & Manges and investment bank Evercore Inc. — acted for Elliott and its affiliates in other matters. Amber and the special master denied any conflicts or favoritism.
Stark refused to disqualify himself or Special Master Robert Pincus, a former Skadden Arps lawyer who he appointed to oversee the auction.
It’s the latest development in the years-long legal battle over Venezuela’s largest foreign asset. A lengthy list of creditors, including Canadian miner Crystallex International Corp. and US driller ConocoPhillips Co., have been lining up for years to collect compensation from a Citgo sale. Some are seeking to recover losses from the nationalization of their assets in Venezuela by late President Hugo Chávez, whom Maduro succeeded in 2013.
The case is is Crystallex International Corp. v. Bolivarian Republic of Venezuela, 17-mc-00151, US District Court, District of Delaware (Wilmington).
(Updates with opposition comment in seventh paragraph.)
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