January 22, 2024 [Reuters]- Dozens of companies have rushed in recent weeks to obtain data and join a U.S. court-ordered auction of shares in a parent of Houston-based oil refiner Citgo Petroleum, Venezuela’s foreign crown jewel, according to people familiar with the matter, as a first-round bidding is set to close on Monday.
The sale, expected to be one of the largest U.S. court auctions, was launched in October by a Delaware judge to settle a long-running legal battle against Venezuela for expropriations and mounting debt defaults since it nationalized foreign-owned energy and mining assets more than a decade ago.
The judge found PDV Holding, one of Citgo’s parent companies, liable for the South American nation’s foreign debt, opening the door to some $20.8 billion in claims from 17 creditors. Both companies are owned ultimately by Caracas-based state oil company Petroleos de Venezuela (PDVSA) (PDVSA.UL).
Investment banking firms and energy companies have rushed in at the last minute to obtain and analyze Citgo’s financial and operational data following months of little interest, four people involved in the process told Reuters.
Several dozen groups, including investors, oil and gas companies, refiners and former energy executives, have requested information compiled by Evercore Group, the investment bank overseeing marketing efforts, the people said.
“There is a very good level of interest,” a person with knowledge of the process said. “There are multiple pockets of capital” looking at the company and its assets.
Canadian miner Crystallex, which first brought the case before the Delaware court in 2017, U.S. oil producer ConocoPhillips (COP.N), opens new tab and units of Tidewater (TDW.N), opens new tab were given priority by the court for cashing any proceeds from the sale.
Representatives from Crystallex and the boards overseeing Citgo did not reply to requests for comment. ConocoPhillips and Citgo declined to comment.
CONFODENTIAL OFFERS
Citgo (PDVSAC.UL) operates a 807,000-barrel-per-day oil refining network, owns interests in pipelines and terminals, and supplies fuel to 4,200 independent gasoline outlets in the U.S.
The seventh-largest U.S. refiner reported a $1.9 billion profit for the first nine months of last year.
But it has not paid any dividends to Venezuela since 2019, when Citgo severed ties with PDVSA following U.S. sanctions designed to curb oil revenues to socialist President Nicolas Maduro and support the nation’s transition government. U.S. District Court filing on Friday accepted claims by 17 groups, including units of O-I Glass (OI.N), opens new tab, Tidewater, Koch Industries, Pharo, Red Tree Investments and Contrarian Capital, to receive proceeds from any auction. Any awards will require U.S. Treasury approval.
Confidential offers can be submitted through Monday for the first bidding round, the court ruled, with a second round tentatively planned for May. Bidders’ cash offers for shares in PDV Holding, whose only asset is Citgo, are expected to be turned over to creditors to satisfy court rulings and awards.
“Genuine interest will be quite low given the political and legal risks,” said Matthew Blair, head of refining research at Perella Weinberg Partners’ TPH&Co. “If they break it apart and parties can bid on individual assets, then interest will definitely pick up.”
Boards overseeing Citgo continue to try and settle one or more of the claims against Venezuela ahead of the auction, one of the boards said earlier this month, a move that has been tangled by U.S. protections preventing transactions involving the refiner and a secretive process that has kept details of the appraised value and bidders out of court records.
“The board, advised by its legal team and institutions, will analyze the current circumstances and will apply a proper legal strategy to continue protecting PDVSA’s U.S. assets,” it said in a release.
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