The recent U.S. auction of shares determining the future of Citgo Petroleum, a Venezuelan-owned oil refiner, has yielded a highest bid of $7.3 billion, which falls significantly short of covering the court-approved claims, according to sources familiar with the situation.
A federal court in Delaware is overseeing the auction of shares of the parent company of Citgo, based in Houston, Texas. This auction stems from legal actions related to Venezuela’s debt defaults and expropriations. Creditors, totaling $21.3 billion in claims, have converged on Delaware, driven by a case initiated almost seven years ago by Crystallex, a mining company.
However, the results from the initial bidding round in January indicate a problematic sales process. Analysts and insiders caution that the offers received so far are unlikely to satisfy either the creditors or the current owners of Citgo. This case, notable for breaking new legal ground in sovereign immunity, faces the challenge of leaving many claims unsettled.
The court might need to reconsider its approach to the sales process or entertain an alternative proposal put forth by Venezuela. This alternative plan suggests a larger payout to creditors spread over multiple years, while Venezuela retains some ownership in the company.
Judge Leonard Stark, presiding over the case, has reportedly declined to entertain Venezuela’s payment proposals thus far. However, with the highest bid from the initial round covering only a fraction of accepted claims, there’s speculation about a potential reconsideration.
Initial bids have fallen short of expectations, notably below the $13 billion to $14 billion valuation estimated by court-appointed specialists. This shortfall has prompted Citgo’s parent companies and boards to revisit an earlier offer: a $10 billion payment structured over time, sourced from Citgo’s profits, equity, and loans.
