The “special master” chose the Canadian miner’s bid as the highest that met the court’s requirements.
By Ricardo Vaz
CARACAS, (venezuelanalysis.com) – A Delaware court official has recommended a final offer in the ongoing auction of Venezuela’s US-based refiner CITGO that could mark the end of a years-long process and the loss of the country’s most important foreign asset.
On Thursday, court-appointed “Special Master” Robert Pincus chose a US $7.38 billion bid from Canadian miner Gold Reserve as the preliminary winner of a court-mandated sale of shares belonging to PDV Holding (PDVH), CITGO’s parent company.
Delaware Judge Leonard Stark initiated the auction proceedings in late 2022 to satisfy a number of creditor claims against Venezuela, mostly stemming from international arbitration awards concerning assets nationalized by the Venezuelan state in the 2000s. Stark charged Pincus with overseeing the process.
The special master backed the proposal set forward by Gold Reserve’s subsidiary Dalinar Energy Corporation as representing “the highest bid that meets the requirements.” Judge Stark is set to review the offer, with creditors also able to file objections in the coming weeks. A final sale hearing has been scheduled for August 18.
The chosen bid will reportedly satisfy 11 of the 15 claims accepted by the court. Creditors will be paid on a “first come, first served” basis, with Crystallex ($1.0 billion), Tidewater ($80 million), ConocoPhillips ($1.3 billion) and O-I Glass ($700 million) first on the list. The total liabilities stand at $20.6 billion.
Corporations secured multiple “alter ego” rulings that made PDVH, a subsidiary of Venezuelan state oil company PDVSA, liable for the country’s debts. The rulings took place while the company was under the control of the US-backed self-proclaimed “interim government.” The opposition group led by Juan Guaidó has drawn accusations of malfeasance and conflicts of interest over a series of decisions that ballooned CITGO’s debts.
Gold Reserve, itself a claimant looking to collect $1.1 billion, submitted an offer combining equity and debt financing, with lenders including JP Morgan and TD Bank. The proposal received the backing of fellow creditors Rusoro Mining, Siemens and Koch.
Gold Reserve executive vice chairman Paul Rivett thanked Pincus for his efforts and saw the recommendation as an “acknowledgment of the bid’s strength.”
“Our bid satisfies creditors further down the waterfall than was ever contemplated by any prior bid since the inception of the Delaware sale process,” the executive said, adding that the corporation is “looking forward to closing this chapter.”
The Canadian mining giant pursued international arbitration following the revocation of its Brisas and Unicornio mining concessions by the former Hugo Chávez government in 2008. The World Bank’s ICSID court ruled in favour of Gold Reserve in 2014.
Earlier this year, Gold Reserve announced the launch of a separate international arbitration process against Venezuela over the withdrawal of mining rights from the Siembra Minera joint venture in the Orinoco Mining Arc.
The Delaware court-mandated sale of PDVH/CITGO has been marred by delays and controversy since Canadian miner Crystallex initiated proceedings in 2017. In late 2024, Pincus picked a $7.3 billion proposal from vulture fund Elliott Management. However, the offer’s sale terms sparked opposition from claimants and Stark ordered the bidding restarted.
Pincus faced renewed criticism after choosing a $3.7 billion “stalking horse” bid from Red Tree Investments in April to set a minimum value for CITGO. A second round of topping offers attracted further interest. Consortia led by private equity firm Black Lion and trading giant Vitol reportedly submitted $8 and $10 billion bids, respectively.
Gold Reserve’s effort to purchase CITGO faces a potential legal obstacle as half of the company’s shares were pledged as collateral for the defaulted PDVSA 2020 bond. Successive orders from the US Treasury Department have blocked bondholders from executing the collateral, with protection recently extended until December.
Red Tree’s April offer included a settlement with the PDVSA 2020 bondholders through the issuance of debt and convertible notes. It is presently unknown whether Gold Reserve has engaged with the separate group of creditors, who are owed around $2 billion. CITGO’s final change of ownership is subject to US government approval, though the Treasury has pledged a “favourable licensing policy.”
For its part, the Maduro government has decried the court-led sale of the Caribbean country’s most valuable foreign asset, valued at 11-13$ billion, as “the theft of the century” and vowed to challenge the loss of the Houston-based refiner.
CITGO owns refineries in Illinois, Louisiana and Texas with a total processing capacity of 769,000 barrels per day (bpd). The firm’s portfolio also includes a pipeline network and over 4,000 service stations, mostly on the US East Coast.
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