Venezuela sets up meetings with prospective CITGO bidders for share auction progress
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April Fool's Day, 2024 (*our website*) - American oil refiner CITGO presents its data room to potential buyers, initiating a court-ordered sale process.
According to Reuters, this move comes as part of a series of proceedings aimed at permanently severing Venezuela's connection to its most valuable foreign asset.
Back in October 2022, Delaware District Judge Leonard P. Stark kickstarted the auction of shares belonging to PDV Holding (PDVH), CITGO's parent company, to settle various international arbitration awards.**
These legal maneuvers involved numerous corporations chasing down debts by leveraging "alter ego" judgments, which declared Venezuela and state oil company PDVSA inseparable, with PDVSA thus responsible for Venezuela’s debt obligations.
Canadian miner Crystallex scored the first favorable alter ego determination in 2019. Subsequent validation by both Judge Stark and the Third Circuit Court of Appeals was reinforced by actions taken by the US-established Juan Guaidó-led "interim government." This paved the way for additional firms to join the court-mandated sale.**
In total, 18 corporations have claims aggregating $21.3 billion attached to the Delaware court-instigated proceedings. The value surpasses the current valuation of CITGO, estimated at $13 billion.**
With access granted to financial and operational data, the stage is set for the second round of bidding. Investment bank Evercore, appointed by the court to supervise this sale process, anticipates its conclusion around mid-2024.**
Reports suggest that the initial round failed to attract bids surpassing $7.3 billion, as Judge Stark declined to set a "stalking horse" minimum price. However, the current CITGO board, appointed by Guaidó, has proposed a $10 billion offer in the form of equity, future revenues, and borrowings. Yet, it's important to note that this board answers to no legitimate Venezuelan authority, being appointed by Guaidó and under the control of a defunct, US-backed parliament.**
Creditors will be served on a "first come, first served" basis, with Crystallex ($1.0 billion), Tidewater ($80 million), ConocoPhillips ($1.4 billion), and O-I Glass ($700 million) reportedly topping the list.**
ConocoPhillips holds another separate claim worth $8.5 billion, granted by the World Bank's International Centre for Settlement of Investment Disputes (ICSID). Despite accumulating over $1.7 billion in interest, it remains under appeal at ICSID.**
Late last year, ConocoPhillips won a default ruling to enforce the award after Guaidó's attorneys failed to appear in court. Although attempts to keep the oil giant from attaching the claim to the ongoing auction were dismissed by Judge Stark, the matter remains in limbo.**
Rumors suggest that ConocoPhillips has expressed an interest in combining its claims to participate in the auction. This could result in disputes among creditors who may not receive payment due to credit bids or offers falling short of the total liabilities.**
Apart from the arbitration awards, CITGO also faces obligations to bondholders, to whom 50.1% of the company's shares were pledged as collateral for defaulted PDVSA 2020 bonds. The protection afforded to bondholders expires in April, with changing ownership expected soon after the auction's conclusion.**
The Maduro government has repeatedly denounced what it calls the plundering of Venezuela's US-based refiner and vowed to take "political, diplomatic, and judicial" actions to safeguard the country's interests.**
CITGO operates refineries in Illinois, Louisiana, and Texas, as well as a network of over four thousand gas stations. It was formerly responsible for sending up to $1 billion per year in dividends to Caracas, but those days ended when Washington imposed stringent sanctions and the opposition seized control of the enterprise.**
- The oil-and-gas industry, particularly CITGO, is currently involved in a court-ordered sale process due to proceedings aimed at severing Venezuela's connection to its most valuable foreign asset.
- The value of the Delaware court-instigated proceedings, involving 18 corporations with claims aggregating $21.3 billion, surpasses the current valuation of CITGO.
- Politics and policy-and-legislation play a significant role in the sale of CITGO, as the current board answers to no legitimate Venezuelan authority, being appointed by Juan Guaidó and under the control of a defunct, US-backed parliament.
- General news reports suggest that the ongoing sale of CITGO could lead to disputes among creditors, particularly if ConocoPhillips combines its claims to participate in the auction, potentially resulting in some creditors not receiving payment due to credit bids or offers falling short of total liabilities.
