×

Financial alliances build as Citgo share auction enters last mile

By Thomson Reuters Jun 17, 2024 | 11:46 AM

By Marianna Parraga

HOUSTON (Reuters) – At least five groups of investors submitted binding bids this month in a U.S. court-ordered auction of shares in Citgo Petroleum’s parent, and three have secured financing commitments for Venezuela’s foreign crown jewel, people close to the matter said.

In the last mile of an unprecedented auction to pay up to $21.3 billion from past expropriations and debt defaults in Venezuela, a federal court officer supervising the auction is working to evaluate bids from big investors and creditors.

Wall Street banks JPMorgan and Morgan Stanley, and advisors and investors Rothschild & Co and Elliott Investment Management have secured financing for several offers, the people said.

The involvement of prominent investors and banks raise the chances of the auction producing a significant offer for the seventh-largest U.S. oil refiner following a first round in January criticized as “disappointing” by parties representing Venezuela in the Delaware case as the highest bid was $7.3 billion.

The auction is expected to be the culmination of a historic case that broke new legal ground in enforcement of international arbitration awards and cracking of sovereign and corporate immunity.

“We reject the robbery of Citgo … Venezuela will not recognize any fraudulent transaction,” Venezuela’s Vice President Delcy Rodriguez said on X on Monday.

On Friday, Venezuelan Oil Minister Pedro Tellechea called on the U.S. court to halt the auction.

The sale has attracted big name investors and energy and trading firms including Vitol, ConocoPhillips and Koch Industries.

JPMorgan, Morgan Stanley, Rothschild, Vitol and ConocoPhillips declined to comment. Koch, Citgo and boards supervising the refiner did not reply to requests for comment.

LAST MILE

Citgo has operated under U.S. protection since 2019 when it severed ties with its ultimate parent, Caracas-based state oil company PDVSA. Its three U.S. refineries process up to 807,000 barrels of oil per day and the company has generated $5.26 billion in combined net earnings in the last nine quarters.

The court process now underway allows bidders to continue to structure financing, “top off” credit bids and potentially raise their offers by at least $100 million to best a competing offer.

Results are expected to be announced in mid-July, according to the court’s auction schedule. A July 2 update by the court official supervising the auction, Robert Pincus, could provide new details on the offers and investors.

Pincus’ attorney declined to comment on the second round’s bidding procedures and results.

Some bidding groups are seeking financing to submit 100%-cash offers, while some creditors are combining credit bids with cash. The court has allowed creditors to use the full amount of their claims in bidding.

Miner Gold Reserve has applied a $1 billion claim against Venezuela as part of its bid, the company said.

Rusoro Mining has said it retained banker Rothschild as financial advisor to maximize the value of its $1.3 billion claim. A spokesman declined to comment on its participation in the auction.

Representatives of Venezuela could request a third bidding round if the second round’s offers are too low, people familiar with their thinking said earlier this month.

(Reporting by Marianna Parraga in Houston, additional reporting by Deisy Buitrago in Caracas, Ron Bousso in London and Gary McWilliams in Houston; Editing by Marguerita Choy)