In recent weeks, a flurry of companies has eagerly sought data and participation in a significant U.S. court-ordered auction involving shares of the parent company of Houston-based oil refiner Citgo Petroleum, a crucial asset for Venezuela. The auction, initiated by a Delaware judge in October, is poised to be one of the largest court auctions in the United States, aiming to settle a protracted legal dispute against Venezuela stemming from expropriations and mounting debt defaults over the last decade. As the first-round bidding deadline looms on Monday, the interest in this high-stakes auction has spiked, with numerous investors, oil and gas companies, refiners, and former energy executives vying for a piece of the action.
The auction’s roots trace back to a Delaware judge’s decision, declaring PDV Holding, one of Citgo’s parent companies, liable for Venezuela’s foreign debt. This ruling opened the door to substantial claims totaling around $20.8 billion from 17 creditors against the parent company. Both PDV Holding and Citgo are ultimately owned by Petroleos de Venezuela (PDVSA), Venezuela’s state oil company. The sale represents an attempt to resolve the complexities arising from Venezuela’s nationalization of foreign-owned energy and mining assets.
In a noteworthy development, numerous investment banking firms and energy companies have rushed to gather and analyze Citgo’s financial and operational data. Sources suggest that this heightened interest comes after months of limited attention to the auction. A wide array of groups, ranging from investors to oil and gas companies, refiners, and former energy executives, have sought information compiled by Evercore Group, the investment bank overseeing marketing efforts. This late surge underscores the appeal of Citgo’s assets and the potential financial gains for successful bidders.
Several companies have been prioritized by the court for cashing in on the proceeds from the sale. Notably, Crystallex, the Canadian miner that initiated the case in 2017, U.S. oil producer ConocoPhillips, and units of Tidewater have received priority status. Crystallex and Citgo’s boards, however, have not provided comments on these developments. ConocoPhillips and Citgo have chosen to remain silent on the matter.
Citgo, operating an 807,000-barrel-per-day oil refining network, holds interests in pipelines and terminals, and supplies fuel to over 4,000 independent gasoline outlets in the U.S. Despite reporting a $1.9 billion profit in the first nine months of the previous year, Citgo has faced challenges. The company has not paid dividends to Venezuela since 2019 due to severed ties with PDVSA following U.S. sanctions aimed at curbing oil revenues to President Nicolas Maduro.
The auction’s first-round bidding concludes on Monday, with a second round tentatively scheduled for May. Bidders are expected to submit cash offers for shares in PDV Holding, Citgo’s parent company. The court rulings and awards will dictate the distribution of proceeds among creditors. However, concerns regarding political and legal risks may influence genuine interest. Analysts believe that if the assets are auctioned individually, interest levels may significantly rise.
The heightened interest in the U.S. auction of shares in Citgo’s parent company reflects the significance of the proceedings and the potential financial gains for successful bidders. As the first-round bidding deadline approaches, the dynamics of the auction, including the participants and their strategies, will unfold. The outcome of this significant court-ordered auction is poised to have far-reaching implications for Venezuela, creditors, and the companies involved, setting the stage for a complex and closely watched legal and financial drama.
