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(Bloomberg) — Venezuelan representatives and bidders for its most valuable foreign asset are clashing in a US court on Monday, as a judge in Delaware starts a three-day sale hearing to decide who will take over the parent of Citgo Petroleum Corp.
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Lawyers for Venezuela, hired by the nation’s political opposition, argue that the bids for Citgo’s parent, PDV Holding, are far below the company’s value and criticized the auction process. Meanwhile, creditors and bidders say the country’s valuations of the company, which is being auctioned off to satisfy more than $20 billion in claims against Venezuela, are inflated.
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The main contenders to purchase Citgo’s parent are Amber Energy Inc., an affiliate of Elliott Investment Management, and a consortium of creditors led by Gold Reserve Ltd., a Canadian miner that had its Venezuela assets expropriated by late president Hugo Chavez.
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Both Amber and Gold Reserve’s bids are “billions of dollars short,” wrongfully leaving money on the table in the auction, Nate Eimer, a lawyer for Citgo Petroleum, told the court on Monday. Venezuela’s representatives suggested postponing the sale hearing, an idea that was quickly quashed by the judge.
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The legal standoff reached a tipping point last month when the court-appointed special master, Robert B. Pincus, recommended that Amber’s bid be approved. Gold Reserve filed an improved proposal after, but, according to Pincus, it didn’t “match or exceed” the offer presented by Amber, which includes a $2.1 billion settlement with a group of PDVSA noteholders.
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The bondholders, who have a claim against a controlling stake in a PDV Holding subsidiary, have become a major hurdle in the years-long legal battle for Citgo. Pincus finally concluded that a deal with these creditors makes the sale more likely to close, thus recommending Amber’s offer over a higher competing bid by Gold Reserve.
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During the first day of the hearing, Gold Reserve was accused of being a disgruntled bidder. “We are disgruntled. Our bid has been cast aside in favor of an offer that is $2 billion lower,” Matthew Kirtland, a lawyer for Gold Reserve, said in the hearing.
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However, there are still risks to the bonds. The recommended offer needs to be approved by a judge. Moreover, the debt is currently being challenged in a New York court over its validity, with a decision expected by the end of the month. The US district judge overseeing the case, Katherine Polk Failla, refused to pause her ruling while the auction is being settled, adding an additional layer of uncertainty to the process.
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