By Marianna Parraga
HOUSTON (Reuters) -A U.S. court organizing an auction of shares in the parent of Venezuela-owned refiner Citgo Petroleum has approved a 30-day competition period starting on April 28 to receive bids, with the final winner of the sale process to be selected on June 11, according to court filings.
The calendar, approved on Friday by Delaware judge Leonard Stark, follows the confirmation of a $3.7 billion starting bid by Contrarian Funds’ affiliate Red Tree Investments.
The selection of Red Tree’s ‘stalking horse’ bid unleashed a battle among the 16 creditors that remain in the 8-year long case. The offer was considered too low by some parties and too complex by others as it includes an agreement to pay up to $3 billion to the holders of a Venezuelan defaulted bond.
However, following a hearing last week where creditors and bidders explained their arguments, some companies are hopeful the court will prioritize price over certainty of closure when selecting the auction’s winner next month, so the largest possible amount of creditors can get a slice of the proceeds.
Miner Gold Reserve, which is one of the creditors in the case and this year submitted a $7.1 billion offer that was not selected as starting bid, said it was “encouraged” by the way judge Stark decided on the stalking horse bid.
“The order expressed reservations about Red Tree’s lower bid price and the implicit overvaluation placed on the transaction support agreement with the 2020 bondholders, to the detriment of the judgment creditors in the Citgo sale proceeding,” a company spokesperson said in an email to Reuters.
A consortium by a subsidiary of Gold Reserve, miner Rusoro and two units of conglomerate Koch is looking forward to re-bidding in the next stage of the process, the person added.
Among the four consortia and companies that submitted offers this year is trading house Vitol. It was not immediately clear if it would submit a new bid.
Following the 30-day “topping” period, in which rival offers to the starting bid will be submitted and analyzed by a court officer overseeing the auction, a final hearing will be held on July 22 on the sale process, the court said.
The creditors in the case are collectively seeking some $21 billion in compensation for debt defaults and expropriations in Venezuela, but Citgo’s value has been calculated in no more than $13 billion, with total proceeds from the auction estimated in between $7 billion and $8 billion.
Venezuela’s government has said the auction is a “robbery” of sovereign assets.
(Reporting by Marianna Parraga, Editing by Franklin Paul and Marguerita Choy)
