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Venezuela creditors with top priority in Citgo share auction

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Adds bondholders case, updates dates and details

By Marianna Parraga

HOUSTON, June 10 (Reuters) - Companies submitting bids through Tuesday in a U.S. court-ordered auction of shares in Citgo Petroleum parent PDV Holding must present proposals to pay holders of 2020 bonds issued by Venezuela state oil firm PDVSA.

The court is auctioning shares in a parent of Venezuela's foreign crown jewel, Houston-based Citgo, that it found liable for the South American country's debts. The auction has drawn interest by several energy companies and investors and could result in a change of ownership of the refiner.

The bondholders' claim adds a new twist to the long-running case in Delaware, first introduced by miner Crystallex against Venezuela, which has allowed 18 creditors to jointly seek $21.3 billion in compensation for expropriations and defaults.

The holders, whose bonds were collateralized with a 50.1%-stake in one of Citgo's parents, PDV Holding, have beenfighting in separate U.S. courts to have the bonds declared valid. They are seeking $1.9 billion in compensation.

Their claim is poised to reduce the auction proceeds available to creditors, while securing the holders a compensation, even if not immediately. The bids will decide the fate of the seventh-largest U.S. refiner as soon as this summer.

Proceeds from the auction may cover only about a third of claims cleared by the court, based on the highest offer in a first round in January. The judge's bidding instructions, updated in May, ask potential buyers using credit bids to say whether their offers include cash provisions to pay the 2020 bondholders, a filing showed.


Citgo, ultimately owned by Caracas-headquartered state firm Petroleos de Venezuela PDVSA.UL, has been valued at between $11 billion and $13 billion. But the highest offer in the first bidding round was$7.3 billion.

The court years ago found Citgo parent, PDV Holding, liable for Venezuela's expropriations and debt defaults, bringing dozens of other creditors to press their claims.

Judge Leonard Stark has said the sale process might be completed in July, but an authorization from the U.S. Treasury Department will be needed to award the winner. Venezuela has asked the U.S. topause the auction until elections in that country next month.

The judge last year gave priority to miner Crystallex, who introduced its claim in Delaware in 2017, to cash some $990 million. A $72 million claim by offshore service provider Tidewater TDW.N has second-highest ranking.

Oil producer ConocoPhillips COP.N secured a position near the front of the line to cash a $1.33-billion claim, one of the three awards totaling more than $10 billion the company has registered.

Also near the top of the list are glass maker O-I Glass OI.N, Huntington Ingalls Industries HII.N, ACL Investments, Red Tree Investments, Rusoro Mining RML.V, a second, $48.1 million claim by Conoco, and units of Koch Industries.


The U.S. court has kept most of the bidding rounds' details confidential, including bidder names. It last year hired investment banker Evercore Group EVR.N to market Citgo's assets, which include three refineries, terminals and pipelines.

Evercoreand court official Robert Pincus are expected to begin reviewing and ranking the bids as soon as Wednesday, people close to the process said. They may seek clarification from bidders before presenting them to the court.

Bidders are expected to include top investors and energy companies. Activist investor Elliott Investment Management has beenweighing a bid for the shares, while a group of creditors represented by financial firm Centerview Partners was aiming to lure Conoco to join another offer, sources told Reuters in April.

Conoco and Elliott were among 12 groups that submitted indications of interest during a first round in January. Refiners Koch Industries and PBF Energy PBF.N also are weighing offers.

The arrival of at least two groups with substantial resources and experience in corporate restructurings has increased the likelihood of an ownership change for the century-old refiner.

Citgo's smallest and least profitable refinery, in Corpus Christi, Texas, recently has been thrust into the spotlight as a potential breakout candidate ahead of the final bidding round. Producers, refiners and investment funds increasingly have shown interest in that asset.

Venezuela pursues debt settlement with Crystallex, Conoco, bondholders nL1N38K2FD

Creditors cleared to take part in Citgo parent's share auction https://tmsnrt.rs/3vKQglY

Reporting by Marianna Parraga and Gary McWilliams; Editing by David Gregorio


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