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Investor Groups Compete in Citgo Auction for Venezuela Compensation
In a dramatic culmination of an unprecedented legal case, at least five investor groups have submitted binding bids in a U.S.-ordered auction of shares in Citgo Petroleum's parent company. This auction aims to address up to $21.3 billion owed from past expropriations and debt defaults in Venezuela. Among these groups, three have secured financing commitments, heightening the auction's stakes, according to sources close to the matter.
Prominent Financial Backers
Major Wall Street entities like JPMorgan and Morgan Stanley, along with influential advisors and investors such as Rothschild & Co and Elliott Investment Management, have arranged financing for several bids. This support from high-profile financial institutions increases the likelihood of a significant offer for Citgo, the seventh-largest oil refiner in the U.S. The initial bidding phase in January faced criticism for its "disappointing" highest bid of $7.3 billion.
Groundbreaking Legal Case
This auction marks the high point of a historic legal case that has set new precedents in enforcing international arbitration awards and exploring the limits of sovereign and corporate immunity. Amid the ongoing legal proceedings, Venezuelan officials have vociferously opposed the auction. Vice President Delcy Rodriguez publicly condemned the auction, declaring that Venezuela would not recognize any "fraudulent transaction." Meanwhile, Oil Minister Pedro Tellechea has called for a halt to the proceedings.
High-Profile Interest
The auction has drawn interest from notable investors and energy firms, including Vitol, ConocoPhillips, and Koch Industries. However, representatives from JPMorgan, Morgan Stanley, Rothschild, Vitol, and ConocoPhillips declined to comment on their involvement, while Koch and Citgo did not respond to requests for comment.
Citgo's Strong Standing
Citgo has been shielded by U.S. protections since 2019, severing its ties with its Caracas-based parent, PDVSA. The company operates three U.S. refineries with a combined processing capacity of 807,000 barrels of oil per day and has accrued $5.26 billion in net earnings over the past nine quarters.
Complex Bidding Dynamics
Currently, bidders have the opportunity to adjust their financing and increase their offers by at least $100 million to surpass competing bids. The results of this round of bidding are expected by mid-July, with Robert Pincus, the federal court officer overseeing the auction, potentially providing updates in early July. Pincus' legal representative has refrained from commenting on the status of the second-round bids.
Varied Financing Approaches
Some groups are working to secure full cash offers, while others are mixing credit bids with cash. The court has permitted creditors to utilize the entirety of their claims in their bids. For instance, Gold Reserve has applied a $1 billion claim against Venezuela as part of its bid, and Rusoro Mining has retained Rothschild to maximize the value of its $1.3 billion claim. A representative declined to comment on Rusoro's participation.
Potential for Additional Bidding
If the current offers fall short of expectations, representatives of Venezuela could push for a third bidding round. This auction has already seen a heightened level of interest and complexity, shaping up to be a defining moment in the enforcement of international arbitration awards.
