By Marianna Parraga
HOUSTON (Reuters) – A U.S. federal court official overseeing an auction of shares in the parent company of Venezuelan refiner Citgo Petroleum asked on Monday the judge in the case to prevent creditors from filing additional lawsuits that could derail the sale process.
Three creditors who had filed claims in court but are unlikely to receive auction proceeds filed separate lawsuits this year to recover billions of dollars in defaulted Venezuelan bonds. The three – Gramercy Distressed Opportunity Fund, G&A Strategic and Girard Street Investments – are related companies.
The parallel lawsuits have complicated the auction in U.S. District Court in Delaware, which after several delays aims to select a winner this month and complete a sale in November.
The case was first introduced in Delaware in 2017 by miner Crystallex and has since given another 17 creditors, including bondholders, the opportunity to pursue shares in Citgo’s parent company, PDV Holding.
However, the bids received so far would not cover the $21.3 billion in claims registered with the Delaware court. Citgo is valued at between $11 billion and $13 billion, and the highest bid in an initial bid round in January was $7.3 billion.
The situation has prompted some creditors to file lawsuits in other courts. Gramercy, Girard Street and G&A claims are near the bottom of the list of companies likely to receive sale proceeds.
Reuters could not immediately reach the companies for comment.
“Certain creditors are attempting to circumvent this court’s sale process – despite their prior participation in that process – by filing last-minute lawsuits in other forums,” court official Robert Pincus wrote in his request to the judge in the case.
“This threatens to undermine the sale process, to the detriment of the creditors who followed the court process,” he added. Bidders are concerned about the risk that creditors will later lay claim to the assets they are trying to acquire, he said.
Pincus’ request will be “very difficult to fulfill,” said attorney Jose Ignacio Hernandez of consulting firm Aurora Macro Strategies, as the Delaware court has no jurisdiction over lawsuits in other states.
