HOUSTON (Reuters) – Lawsuits from three companies seeking to boost their chances of raising proceeds from an auction of shares in Citgo Petroleum’s parent company can proceed, a U.S. judge ruled in an order issued on Monday.
The decision could reduce the proceeds from any sale, the court official overseeing the auction in federal court in Delaware had said in a motion to block the parallel lawsuits. Shares in Citgo parent company PDV Holding are being auctioned to repay $21 billion in claims for debts and expropriations by Venezuela and state oil company PDVSA.
PDV is a US subsidiary of PDVSA and is the indirect sole shareholder of Citgo.
The three related companies – Gramercy Distressed Possibility (SO 🙂 Fund, G&A Strategic and Girard Street Investments – filed parallel lawsuits in other courts after their claims were unlikely to be fully recovered in the Delaware court auction.
Gramercy declined to comment.
The court official overseeing the auction had asked the judge to dismiss their claims in Texas and New York, saying they could lower the bids. He had recommended bids from Amber Energy, a subsidiary of Elliott Investment Management, which were conditional on the issuance of a court order.
Elliott had threatened to leave the auction if the order was not issued. A spokesperson immediately declined comment.
U.S. District Judge Leonard Stark, who called dismissing the order his “least bad option,” firmly opposed the Special Master’s motion to issue this order. The special master is a court official who oversees the auction.
The proposed motion lacks a legal basis, and evidence that new bids are being prepared shows that Gramercy and others’ claims “are not nearly as big of a problem as the Injunction Motion portrays them to be,” Stark wrote.
The stock auction was “never intended” to avoid the risk that others would try to seize Venezuela’s assets. “The fundamental premise of the Special Master’s Motion, that an injunction is necessary, is unproven,” Stark wrote.
