Holders of billions in Venezuelan bonds and notes are stepping into the spotlight as key players in a pivotal U.S. court case regarding the ownership of Citgo Petroleum. Their last-minute involvement threatens to derail an auction intended to compensate over a dozen companies for unpaid debts and expropriations by the Venezuelan government.
At least two groups of bondholders have filed legal actions in various U.S. courts to enforce their claims against Citgo assets, which have long been sought after by industrial conglomerates, mining companies, and oil firms. This development adds yet another layer of complexity to a case that has dragged on for seven years, creating uncertainty about which company is best positioned to acquire the seventh-largest refiner in the United States.
In response to these developments, Elliott Investment Management’s affiliate, Amber Energy, has imposed new conditions on its $7.3 billion bid for PDV Holding, Citgo’s parent company. PDV Holding’s sole asset is Citgo’s extensive refining network, which has a capacity of 807,000 barrels per day. Should the Delaware court overseeing the auction fail to block the competing claims, Amber Energy’s bid could be rescinded within days, resulting in chaos for the auction process.
Major creditors, including oil giant ConocoPhillips, Gold Reserve, and mining company Crystallex, have opposed allowing the bondholders to bypass established claims. Crystallex was instrumental in initiating the original case that deemed Citgo’s parent liable for Venezuela’s debts. If the Gramercy claims are allowed, they could undermine the court’s carefully structured “first come, first served” system, which currently prioritizes payments to Crystallex, Tidewater, ConocoPhillips, O-I Glass, and Huntington Ingalls.
Citgo, often regarded as Venezuela’s crown jewel in foreign assets, has been valued at up to $13 billion in the auction, while total claims against those shares amount to approximately $21.3 billion. Venezuela’s external debt remains at a staggering $150 billion, most of which is unpaid.
Robert Pincus, the court officer managing the auction, has requested Judge Leonard Stark to prohibit creditors already participating in the sale from pursuing parallel claims in other courts. Judge Stark is expected to issue a ruling soon, which could be challenged, further delaying the sale or forcing Pincus to negotiate with alternative bidders—or potentially scrap the auction entirely.
Another group of creditors, who hold bonds collateralized by Citgo equity, may also seek prioritization, despite having not yet won their legal battles regarding the bonds’ validity. Judge Stark recently approved a motion to include payment provisions as part of bids, granting them a place in the deliberations. However, Pincus was unable to secure a payment agreement with these bondholders by the court’s deadline. The ongoing complexities mean that Amber Energy’s bid remains unconfirmed by the judge, and enforcement of the auction deadlines will only occur once a new timeline is established.
Several creditors have indicated they might adopt Gramercy’s strategy by filing similar lawsuits if the judge does not prevent bondholders from pursuing claims in other courts. This month, Siemens Energy also filed a lawsuit in Texas, aiming to recover approximately $200 million related to an unpaid promissory note from Citgo’s ultimate parent, state-owned PDVSA.
Critics, including creditors who do not hold Venezuelan bonds and representatives of Venezuela, have expressed concerns about the negotiations between Pincus and Amber Energy, questioning their transparency and the adequacy of the bid, which may not even cover initial claims. These stakeholders will have the opportunity to file objections to both the bid and the auction process once a new schedule is approved, likely delaying the final hearing to early 2025, according to the judge.
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