Venezuelan Court-Ordered CITGO Asset Auction Awards Vulture Fund Elliott as Winner
Breaking News: September 29, 2024 (our website) - Elliott Investment Management, the infamous US hedge fund led by Paul Singer, has clinched the court-mandated auction for Venezuela's US-based refiner CITGO.
According to legal filings, the court-appointed "Special Master" Eric B. Pincus selected Elliott's staggering US $7.286 billion bid for the parent company of CITGO, PDV Holding (PDVH). The proposal comes from Elliott's affiliate, Amber Energy.
It all began in October 2022 when Delaware District Judge Leonard P. Stark initiated a sale of PDVH shares, aiming to settle claims from 18 creditors against the debt-laden Caribbean nation, totaling US $21.3 billion. The process was initiated by Canadian mining enterprise Crystallex.
The bidding war saw multiple rounds, with the final one wrapping up in June. Other heavyweights in the game were oil refiner CVR Energy and miner Gold Reserve, who unfortunately had to quit due to unspecified reasons.
The buyer, Elliott Investment Management, is well-known in the financial world for its ruthless strategies focusing on distressed securities and their love for sovereign debt—particularly from countries in financial turmoil.ховка
In 2002, Argentina faced a default, and Elliott refused to collaborate with the country's debt restructuring process. Instead, the firm embarked on aggressive legal strategies and asset seizures, securing an impressive settlement of $2.4 billion in 2016—nearly four times their initial investment.
Elliott's winning bid includes a blend of cash and credit, but it remains uncertain whether the firm teamed up with any of the Delaware creditors.
The full payment is expected to cover a fraction of the claims, with Crystallex ($1.0 billion), Tidewater ($80 million), ConocoPhillips ($1.3 billion), and O-I Glass ($700 million) at the top of the line. If that isn't dramatic enough, ConocoPhillips is also pursuing separate judicial routes to collect, such as seizing Venezuelan natural gas proceeds from joint projects with Trinidad and Tobago.
The reported offer will be distributed on a "first come, first serve" basis. We're just wondering what happens when everyone else shows up!
The purchase agreement outlines an escrow account to address disputes from the holders of defaulted Venezuelan bonds, but it's unclear whether it will pacify the angry bondholders. Special Master Pincus warned that the investment firm "may elect to terminate the proposed purchase agreement" due to ongoing legal battles.
The bondholders hold the key as 50.1 percent of CITGO's shares were pledged as collateral. The US Treasury's Office of Foreign Assets Control (OFAC) has promised a "favorable licensing policy" to the eventual auction winner, but the plan still needs the green light from the US Treasury Department.
The fall of CITGO is a contentious issue between the Venezuelan government and the parallel administration led by Juan Guaidó. The latter has been accused of sloppy handling of legal affairs, which facilitated ConocoPhillips' massive $8.5 billion arbitration award. This messy situation has ballooned CITGO's liabilities, making off-court settlements with creditors impossible.
Caracas calls the auction "the theft of the century" and has vowed to challenge the loss of the refiner, although Venezuela's troubles don't seem to give the country much capacity to fight the giant US hedge fund.
CITGO, a subsidiary of Venezuela's state oil company PDVSA, owns three refineries in the US with a combined processing capacity of 769,000 barrels per day (bpd). Additionally, it runs over 4,000 service stations, mostly on the US east coast.
- The court-mandated auction for Venezuela's US-based refiner CITGO, owned by PDV Holding (PDVH), was won by Elliott Investment Management, reportedly known for aggressive strategies in finance and sovereign debt.
- According to the report, a blend of cash and credit was used in Elliott's winning bid, and it remains unclear if they collaborated with any Delaware creditors in the acquisition process.
- The bidding process for PDVH shares was initiated in October 2022 by Canadian mining enterprise Crystallex, aiming to settle claims against the debt-laden Caribbean nation, with a total of US $21.3 billion in claims from 18 creditors.
- The fall of CITGO, a subsidiary of Venezuela's state oil company PDVSA, is a contentious issue between the Venezuelan government and Juan Guaido's parallel administration, with Caracas calling the auction "the theft of the century" and vowing to challenge the loss of the refiner.
- General-news and crime-and-justice headlines are likely to feature the ongoing legal battles between Elliott Investment Management and the Venezuelan government, as well as the impact of the ownership change on business operations and sustainability at CITGO.
