Elliott’s conditional offer selected in Citgo share auction, sources say By Reuters

By Marianna Parraga and Gary McWilliams

HOUSTON (Reuters) -A conditional offer for shares in Citgo Petroleum’s parent by financial firm Elliott Investment Management was accepted by a U.S. court officer overseeing an auction that could decide the future control of the Venezuela-owned oil refiner, sources said.

A U.S. District Court in Delaware is auctioning shares in Citgo parent PDV Holding to repay up to $21.3 billion in claims against Venezuela and state-oil firm PDVSA for expropriations and debt defaults. A second and final bidding round closed earlier this year, leading to negotiations on terms.

Elliott’s offer for shares in Citgo parent is a combination of cash and credit and is subject to the resolution of claims by a group of holders of defaulted Venezuela bonds led by Gramercy Distress Opportunity Fund, the sources said.

The value of Elliott’s offer could not be immediately learned. The company did not reply to requests for comment.

Its pursuit of control of Citgo follows successful campaigns that pressured U.S. oil refiners Marathon Petroleum (NYSE:) and Phillips 66 (NYSE:) to improve their results. It earned billions of dollars from its Marathon Petroleum effort.

Elliott submitted offers in the two bidding rounds, competing with rival bids from U.S. oil refiner CVR Energy (NYSE:) and miner Gold Reserve.

Even though the court established a priority ranking for claims, some bondholders have been pursuing their claims in separate court actions, threatening to derail the sales process that has been delayed five times.

TERMS CHALLENGED

The conditional nature of Elliott’s bid is stirring opposition from Venezuela parties involved in the case, since the federal judge initially said the offer selected would have to be binding and final.

Earlier on Friday, court officer Robert Pincus notified the judge he had ended talks with holders of PDVSA’s 2020 bonds without a resolution, a condition he had imposed to consider offers in the second round, a filing showed. The bonds are collateralized with Citgo’s equity.

Thomas Laryea, an attorney representing the Venezuela Creditor Committee that includes holders of 2020 bonds, declined on Friday to comment on developments.

U.S. judge Leonard Stark has not confirmed the court officer’s selection. He has planned to discuss next week a proposal to block the bondholders from resorting to other courts and trying to “jump the line” set by Delaware’s creditors list.

Even if Stark approves the motion, the Gramercy-led group can challenge his decision, which would ultimately freeze Elliott’s offer until the dispute is resolved, experts said.