By Ron Bousso, David French and Marianna Parraga
LONDON/HOUSTON (Reuters) – Hedge fund Elliott Investment Management is considering a bid for shares in the parent of oil refiner Citgo Petroleum in a U.S. court-ordered auction, while a group of creditors represented by Centerview Partners is asking ConocoPhillips (NYSE: ) to join make another offer, said five people close to the matter.
Investment banker Centerview has been tapped to bring a potential bid in federal court in Delaware on behalf of investors and creditors pursuing Venezuela’s foreign assets to recover claims for expropriations and debts, three of the people said.
The Centerview group wants oil producer ConocoPhillips, which has the largest claims in the lawsuit, to join forces ahead of the latest round of bidding, which closes in June. Conoco has not yet decided whether this will happen, said a person familiar with its thinking.
Elliott, which has billions of dollars of investments in U.S. oil refineries, met separately with Citgo executives to obtain financial and operational information as part of preparations for the bidding round, two of the people said.
The arrival of two groups with significant resources and experience in corporate restructuring has increased the likelihood of an ownership change for the century-old refinery, the crown jewel of Venezuela’s foreign assets.
The court is auctioning shares in Citgo parent company PDV Holding after a trial that broke new legal ground in sovereign immunity cases by holding the company liable for the South American country’s payment arrears and expropriations. PDV Holding’s sole asset is Houston-based Citgo.
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A total of 18 creditors claiming a collective $21.3 billion have been released from the proceeds of the auction. The court sale process will be completed in July, after seven years of litigation.
BUY AND SELL
Conoco was one of 12 groups that expressed interest during an initial bidding round in January, Reuters reports.
Conoco could still join the Centerview group or team with Elliott. Binding offers must be submitted no later than June 11.
The group represented by Centerview does not plan to own the seventh-largest U.S. refinery in the long term. It is considering setting up a holding company that would allow participants to recoup claims and profits by selling shares in the future, two of the people said.
Oil refiners Koch Industries and PBF Energy (NYSE:) are also weighing binding offers, one of the people familiar with the auction said.
Centerview and Elliott declined comment on the offer. Spokespeople for Koch and PBF did not immediately respond to requests for comment.
A Conoco spokesperson declined to comment on the offer but said, “We will pursue all legal options to obtain a full and fair recovery.”
Citgo and the boards that oversee the refineries did not immediately respond to requests for comment.
CREDIT OFFERS
The 18 creditors pursuing Venezuela’s foreign assets are Conoco, miners Crystallex, Rusoro Mining and Gold Reserve, oil services company Tidewater (NYSE:) and units of Koch and Huntington Ingalls (NYSE:).
The court has ruled that the creditors can make bids for PDV Holding shares with their claims, consisting entirely or partly of credit offers.
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Credit bids for the shares must include cash to cover higher-ranking creditors, which could require Conoco or others to pool their claims and make a cash-and-credit offer, one of the people said.
Elliott was one of the first parties to meet with Citgo executives for details about the company’s operations, one of the people said.
The highest bid in the first round was $7.3 billion, which is lower than the value assigned to the company by the court. That offer, which a Citgo lawyer called “disappointing,” had raised the prospect that only a handful of creditors would receive the proceeds without a higher offer.
Citgo has been highly profitable, generating $4.8 billion in combined net income over the past two years from its three U.S. refineries, a network of storage terminals and pipelines, and distribution agreements with thousands of fuel retailers.
Although Citgo is owned by Venezuela, it cut ties with its ultimate parent company, Caracas-based state-owned company PDVSA, in 2019. Since then, it has operated under a US license that protects it from creditors. Each buyer will require approval from the U.S. Department of the Treasury to complete the purchase.
Both Venezuelan President Nicolas Maduro and the country’s political opposition have criticized the auction, saying it does not represent a balanced process to pay off the largest possible number of creditors.
