The Ultimate Battle for Citgo Petroleum: Venezuelan Bondholders Threaten Auction Chaos
By Marianna Parraga
In a high-stakes court case to determine ownership of Citgo Petroleum, Venezuelan bondholders have entered the fray, potentially disrupting an auction meant to compensate multiple companies for Venezuela's unpaid debts and expropriations. This last-minute development has thrown the future of the seventh-largest U.S. refiner into uncertainty.
Two groups of bondholders have taken legal action to claim Citgo's assets, challenging industrial conglomerates and oil firms vying for control. These lawsuits, aimed at bypassing the court's payout hierarchy, have caused significant delays in the 7-year-long case.
The recent legal challenges have also cast doubt on a $7.3 billion offer for Citgo's parent company, PDV Holding, by Elliott Investment Management's affiliate, Amber Energy. If the Delaware court cannot resolve the competing claims, the offer may be withdrawn, leading to chaos in the auction process.
The main point of contention is the prioritization of payments, with bondholders seeking to leapfrog other creditors in line. This could drastically reduce the proceeds available to companies like ConocoPhillips, Gold Reserve, and Crystallex, who have been waiting for compensation.
The outcome of this legal battle will determine who takes control of Citgo, a prized asset of Venezuela. The company's value is estimated at $13 billion, while the claims against it total $21.3 billion. With Venezuela's external debt reaching $150 billion, the stakes are incredibly high.
To prevent further disruptions, the court officer managing the auction has requested that creditors refrain from seeking relief in other courts. Judge Leonard Stark is expected to rule on this issue soon, but the decision could face challenges, prolonging the sale process.
In the midst of this legal showdown, other creditors may follow suit and file parallel lawsuits, further complicating the situation. Siemens Energy has already taken this step, adding to the complexity of the case.
Overall, the battle for Citgo Petroleum is a complex legal and financial saga that could have far-reaching implications for creditors, investors, and Venezuela itself. The outcome of this case will shape the future of one of the largest U.S. refiners and determine how billions of dollars in assets are distributed. Stay tuned for updates on this developing story as it unfolds.