((Automated translation by Reuters, please see disclaimer https://bit.ly/rtrsauto))
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Investment firm outperforms competing bids from CVR Energy and Gold Reserve
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The offer combining cash and credit is subject to the resolution of a legal case
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Elliott’s stake in Citgo follows strong results from stakes in Marathon Petroleum and Phillips 66
(Added executive quote to paragraph 4, offer comparison to paragraphs 11-13, and reactions to paragraphs 15-20) by Marianna Parraga and Gary McWilliams
Activist investor Elliott Investment Management was named Friday as the presumptive winner of a U.S. court auction of shares in a parent company of oil refiner Citgo Petroleum, with a bid that places a company value of $7.286 billion in Citgo, owned by Venezuela, according to a court filing.
A U.S. district court in Delaware is auctioning shares of PDV Holding, Citgo’s parent company, to repay up to $21.3 billion in claims against Venezuela and state oil company PDVSA for expropriations and defaults. payment. A second and final call for tenders was launched at the beginning of the year and gave rise to negotiations on the conditions.
Elliott’s offer includes a combination of cash and credit, people familiar with the matter said. It is contingent on the resolution of claims by defaulting Venezuelan bondholders suing the same assets, the court said.
U.S. court officer Robert Pincus said he chose Elliott’s unit, Amber Energy, as the winning bidder, but he added that “the buyer may choose to terminate the purchase agreement proposed” if a proposed motion to block parallel bondholder lawsuits fails.
If Elliott withdraws his proposal, Mr. Pincus may consider other offers. The judge in the case, Leonard Stark, has not yet given the green light to the offer.
Elliott declined to comment.
The investment firm’s acquisition of the seventh-largest U.S. oil refiner follows billions of dollars in gains from its stakes in refiners Marathon Petroleum MPC.N and Phillips 66 PSX.N .
However, Elliott is not a refinery operator, a condition the court had deemed preferable. As part of its range of investments, Elliott has held Venezuelan bonds.
Last year, Citgo earned $2 billion, its second-best annual performance. In the first six months of this year, it reported a profit of $385 million and ended the period with cash of $3.8 billion.
Elliott submitted bids in both bidding rounds, competing with rival bids from U.S. oil refiner CVR Energy CVI.N and miner Gold Reserve GRZ.V. Last week, Gold Reserve abandoned the tender, citing delays and uncertainties in the process.
Elliott’s valuation of Citgo of $7.286 billion is nearly identical to the highest offer received in the first round of bidding, which Citgo’s lawyers called disappointing. The refining company was valued at between $11 billion and $13 billion in the legal proceedings.
The offer will only cover part of the 26 claims approved by the court, excluding any provision for bondholders.
Crystallex, Tidewater TDW.N, ConocoPhillips COP.N, OI Glass OI.N, Huntington Ingalls HII.N, ACL Investments, Red Tree Investments and Rusoro Mining RML.V are among the companies that could receive funds if the ‘Elliott was confirmed.
DISPUTED CONDITIONS
The conditional nature of Elliott’s offer is drawing opposition from the Venezuelan parties in the case, as the judge initially said the successful offer must be binding and final.
“This action does not represent the end of the road or the definitive closure of the process,” Citgo’s supervisory board said in a statement. “Even though we are faced with a complex scenario, we must make it clear that PDVSA still has ownership of its American subsidiaries and that it has legal means to protect its interests
Although the court prioritized it, some bondholders, including a group led by Gramercy Distressed Opportunity Fund, asserted their rights in separate lawsuits, threatening to derail the process. sale, which was delayed five times.
Earlier on Friday, Mr. Pincus informed the judge that he had ended negotiations with PDVSA 2020 bondholders without a solution being found. The bonds are collateralized by Citgo stock, so the dispute may affect the proceeds available to creditors in the case.
Mr. Pincus did not respond to a request for comment. Thomas Laryea, a lawyer representing Venezuela’s Committee of Creditors, which includes 2020 bondholders, declined to comment.
Venezuelan Oil Minister Delcy Rodriguez said this week that the auction represented a “blatant theft” of Venezuela’s assets and recommended that Russia and other countries not hold assets in the United States. United or in Europe.
Judge Stark plans to discuss a proposal next week to prevent bondholders from going to other courts and trying to “jump the line” set by Delaware’s creditors’ list. The court has scheduled a hearing for Nov. 19 to approve the sale.
Even if Mr. Stark approves the motion, the Gramercy-led group can challenge his decision in other courts.
Bondholders have a good chance of making their case worse, said Jose Ignacio Hernandez, a lawyer with the consulting firm Aurora Macro Strategies who has closely followed the case.
“Resolving these disputes will add at least three months to the sales process, making a mid-November closing, as has been proposed, unlikely,” he said.
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