CITGO to Conduct Bidder Briefing Amidst Progress of Share Auction in Venezuela
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Caracas, April Fool's Day 2024 (Our online publication) - Venezuela's US-based oil refiner CITGO prepares to lay it all on the table as it swings open the virtual doors to potential buyers for a court-ordered sale.
According to Reuters, the smorgasbord of financial and operational data about the firm will be served up to eager corporate eyes in the coming days as part of the proceedings that could irrevocably strip the Caribbean nation of its most lucrative foreign asset.
In a bitter twist of fate, Delaware District Judge Leonard P. Stark kickstarted the auction of shares belonging to PDV Holding (PDVH), CITGO's parent company, in October 2022. This was all in an attempt to settle a slew of international arbitration awards.
The legal tug-of-war by corporations to recoup their dues relied on a tactic known as "alter ego" rulings. These rulings declared Venezuela and state oil company PDVSA were one and the same, implying that the latter was liable for the former's debts.
Canada's Crystallex earned the first break when it secured a favorable alter ego decision in 2019. The verdict was repeatedly upheld by both Stark and the Third Circuit Court of Appeals, who pointed to the actions of the US-recognized Juan Guaidó-led "interim government." This green light paved the way for several other firms to enter the court-mandated sale.
A grand total of 18 corporations staked claims worth a jaw-dropping US $21.3 billion on the Delaware court-ordered proceedings. This staggering amount dwarfs CITGO's present valuation of $13 billion.
As part of the information sharing extravaganza, interested parties will get a second chance to place their bets. Investment bank Evercore, appointed by the court to oversee the cockfight, expects the brawl to come to a close in mid-2024.
The initial round reportedly saw no bids over $7.3 billion after Stark nixed the establishment of a minimum "stalking horse" price. The current CITGO board, appointed by Guaidó and backed by a defunct, US-backed parliament, allegedly offered a $10 billion payment in the form of shares, future profits, and borrowings.
The auction process pays out creditors on a "first come, first served" basis, based on when they received their approval writs. Crystallex ($1.0 billion), TIdewater ($80 million), ConocoPhillips ($1.4 billion), and O-I Glass ($700 million) find themselves at the head of the pack.
ConocoPhillips is eyeing an additional compensation claim for a separate $8.5 billion award granted by the World Bank's International Centre for Settlement of Investment Disputes (ICSID). The award has racked up over $1.7 billion in interest but remains under appeal at ICSID.
ConocoPhillips clinched a default ruling to enforce the award after lawyers representing the Guaidó parallel administration failed to show up in court. In late 2023, Judge Stark dismissed attempts by the oil giant's opponents to keep it from hitching its claim to the ongoing auction.
ConocoPhillips is said to be mulling over the possibility of using its combined claims as a bid. Credit bids, as well as offers below the total liability amount, could spark confrontations from claimants who might feel left high and dry.
Besides the international arbitration awards, CITGO owes a debt to holders of the defaulted PDVSA 2020 bond. A whopping 50.1 percent of the company's shares were pledged as collateral. Successive US Treasury orders have prevented bondholders from seizing collateral, with the current protection expiring in April. Once the auction share is settled and CITGO changes hands, they are expected to pounce.
The Maduro government has repeatedly slammed the "theft" of Venezuela's US-based refiner and vowed to take "political, diplomatic, and judicial" steps to safeguard the nation's interests.
CITGO boasts refineries in Illinois, Louisiana, and Texas, along with a network of over four thousand gas stations. At its peak, it used to shower Caracas with as much as $1 billion in yearly dividends before Washington's imposition of far-reaching sanctions and the takeover by the opposition.
- Eighteen bidders, including ConocoPhillips, are preparing to place their bids for CITGO in the court-ordered sale being overseen by investment bank Evercore.
- The initial round of bidding saw no offers exceeding $7.3 billion, while the current board, appointed by Juan Guaidó, had proposed a $10 billion payment in the form of shares, future profits, and borrowings.
- ConocoPhillips, besides its original claim from the Delaware court-ordered proceedings, is also considering using a separate $8.5 billion award from the World Bank's International Centre for Settlement of Investment Disputes (ICSID) as part of its bid.
- Once the auction share is settled and CITGO changes hands, holders of the defaulted PDVSA 2020 bond, who pledged 50.1 percent of CITGO's shares as collateral, are expected to seize the company's assets, pending the expiration of the current US Treasury-imposed protection.
