The recent U.S. auction of shares determining the future of Citgo Petroleum, a Venezuela-owned oil refiner, witnessed lackluster bidding activity, with the highest bid reaching $7.3 billion—merely a fraction of the total court-approved claims, according to sources familiar with the matter.
Conducted by a federal court in Delaware, the auction involves shares of Citgo’s parent company, which was held accountable for Venezuela’s debt defaults and expropriations. Creditors, collectively seeking $21.3 billion in claims since the case was initiated nearly seven years ago by Crystallex, have converged in Delaware to assert their interests.
Despite the considerable claims put forth by creditors, outcomes from the initial bidding round in January indicate a challenging sales process that may not fully satisfy the creditors or current owners of Citgo. Analysts and sources have cautioned that the offers received thus far fall short of addressing all claims, underscoring the complexity of navigating sovereign immunity issues in this legal landscape.
With the existing bids falling below expectations set by court-appointed specialists at $13 billion to $14 billion for the shares, discussions are underway regarding potential revisions to the sales process. Alternatively, Venezuela is drafting a proposal aimed at providing creditors with a more substantial payout distributed over multiple years, while allowing Venezuela to retain a stake in the company.
Judge Leonard Stark, presiding over the case, has reportedly refrained from considering Venezuela’s payment alternatives thus far. However, given that the highest bid from the initial round covers only 14 out of 26 accepted claims from 18 creditors, there may be room for reassessment.
In response to the underwhelming auction results, Citgo’s parent companies and boards are revisiting an earlier offer—a $10 billion payment structured over time using Citgo profits, equity, and borrowings. The need to address the significant shortfall in bids has prompted a reevaluation of potential solutions to safeguard the interests of all stakeholders involved in this intricate legal and financial scenario.