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Elliott Affiliate Boosts Bid for Citgo Parent in Intense Auction

Elliott Affiliate Boosts Bid for Citgo Parent Amid Intensifying Auction Battle

In a significant escalation of the high-stakes auction for control of Citgo Petroleum's parent company, an affiliate of Elliott Investment Management has raised its offer to $7.286 billion, signaling fierce competition among bidders vying for the valuable U.S.-based refining assets. The move comes as part of a protracted legal process overseen by a U.S. federal court in Delaware, aimed at compensating creditors owed billions by Venezuela's state-owned oil company, Petróleos de Venezuela (PDVSA). This auction, which has been unfolding for years, represents one of the most complex and politically charged asset sales in recent memory, pitting hedge funds, energy giants, and other investors against the backdrop of Venezuela's economic turmoil and international sanctions.

The raised bid was disclosed in court filings on August 13, 2024, by Amber Energy Inc., the Elliott affiliate leading the charge. This increase from an earlier $7 billion proposal submitted in January underscores the growing intensity of the competition. Sources familiar with the matter indicate that the hike was prompted by rival offers and the need to secure a commanding position in what could be the final rounds of bidding. The auction process, initiated in 2019, stems from a series of claims against PDVSA for expropriations of assets and defaults on debts during the administration of former Venezuelan President Hugo Chávez. Creditors, including mining company Crystallex International (now controlled by Gold Reserve Inc.), energy firm ConocoPhillips, and various bondholders, have amassed judgments totaling over $20 billion, far exceeding the estimated value of Citgo's parent, PDV Holding Inc.

Citgo, a subsidiary of PDV Holding, is a crown jewel in this saga. As one of the largest refiners in the United States, it operates three major refineries in Texas, Louisiana, and Illinois, with a combined capacity to process about 769,000 barrels of crude oil per day. The company also boasts an extensive network of pipelines, terminals, and branded gas stations across the U.S., making it a strategic asset in the global energy market. Valuations for PDV Holding have fluctuated, but analysts peg its worth between $10 billion and $13 billion, though the auction's structure—designed to maximize creditor recoveries—has introduced uncertainties, including potential offsets for outstanding debts and taxes.

The court-appointed special master, Robert Pincus, has been instrumental in managing the auction, which has seen multiple phases. In the first round, bids were solicited from interested parties, with Elliott's affiliate emerging as a frontrunner. However, the process hit roadblocks, including objections from the Venezuelan government under President Nicolás Maduro, which has repeatedly denounced the sale as an illegal seizure of sovereign assets. Maduro's administration argues that PDV Holding shares were improperly pledged as collateral for loans without proper authorization, complicating the legal landscape. Despite these protests, U.S. courts have proceeded, citing jurisdiction over the assets located in the United States.

Competition has indeed heated up in recent months. Reports suggest that other heavyweight contenders, such as ConocoPhillips, which holds a $1.3 billion claim from an arbitration award over expropriated Venezuelan assets, are actively involved. Conoco has expressed interest in using auction proceeds to satisfy its judgments, potentially through credit bids that allow creditors to offset their claims against the purchase price. Similarly, Gold Reserve, with a $1 billion claim from the Crystallex case, could play a pivotal role. There are also whispers of interest from major oil companies like Chevron or even private equity firms, though no official bids from them have been confirmed in public filings.

Elliott's strategy appears multifaceted. Known for its activist investing approach, the firm—led by billionaire Paul Singer—has a history of pursuing distressed assets and engaging in lengthy legal battles to unlock value. By raising its bid, Amber Energy not only aims to outmaneuver rivals but also to address potential concerns from the court about maximizing returns for all creditors. The offer includes provisions for assuming certain liabilities and ensuring operational continuity at Citgo, which employs thousands and plays a critical role in U.S. fuel supply chains. Analysts note that the bid's structure could appeal to the court by providing immediate cash payouts to smaller creditors while allowing larger ones to negotiate settlements.

The broader implications of this auction extend beyond the courtroom. For Venezuela, losing Citgo would represent a devastating blow to its already crippled economy, as the refiner has historically been a key source of revenue and a foothold in the U.S. market. The Maduro government has lobbied the Biden administration to intervene, citing U.S. sanctions that prohibit direct dealings with PDVSA. However, the U.S. Treasury Department's Office of Foreign Assets Control (OFAC) has issued licenses allowing the auction to proceed, emphasizing the need to enforce court judgments while navigating geopolitical sensitivities.

As the auction enters what could be its decisive phase, stakeholders are watching closely. The court is expected to evaluate the latest bids in the coming weeks, potentially leading to a final selection by late 2024 or early 2025. If Elliott's affiliate prevails, it would mark a major victory for the hedge fund in a saga that has spanned over a decade. Yet, uncertainties remain: appeals from Venezuela, potential regulatory hurdles, and the volatile oil market could all influence the outcome. Energy experts predict that whoever wins control of Citgo will inherit a robust operation but also face challenges like adapting to the global shift toward renewable energy and managing legacy ties to Venezuelan crude supplies.

This development highlights the intersection of international law, corporate finance, and geopolitics. For creditors, it's a long-awaited chance at restitution; for investors like Elliott, an opportunity to capitalize on undervalued assets; and for the energy sector, a reminder of the risks inherent in resource-dependent economies. As bids continue to climb, the fate of Citgo hangs in the balance, with billions at stake and no clear end in sight to the legal maneuvering. (Word count: 928)

Read the Full reuters.com Article at:
[ https://www.reuters.com/legal/legalindustry/elliott-affiliate-raises-bid-citgo-parent-competition-heats-up-2025-08-13/ ]