US court clears sale of Citgo parent’s shares to Elliott affiliate after contentious auction

A US federal judge on Saturday approved the sale of shares in PDV Holding (PDVH), Citgo Petroleum’s Venezuelan parent company, to an Elliott Investment Management subsidiary.

The decision followed his acceptance earlier this week of Elliott’s $5.9 billion bid in a court-organised auction to settle Venezuela-linked creditors.

The order is the final major legal step in a two-year auction process to settle the claims of up to 15 creditors related to debt defaults and expropriations in the South American country.

The long-running dispute originated with Crystallex’s claim

The case arises from a 2017 action brought by Canadian miner Crystallex, which sought to enforce an arbitration award against Venezuela.

The Delaware court ultimately determined that PDVH, Citgo’s US-based parent company, could be held accountable for Venezuela’s obligations, allowing more than a dozen other creditors to seek recovery through the auction.

The widening of the lawsuit allowed multiple firms with outstanding claims against Venezuela to participate in the sale process, thereby raising the scope and stakes of the Delaware proceedings.

Amber Energy’s bid survives objections

The bid from Amber Energy, which includes a commitment to pay $2.1 billion to holders of a defaulted Venezuelan bond, was earlier this year recommended by a court-appointed officer in charge of the auction.

This was a departure from his earlier preference for Gold Reserve’s competing bid.

The updated recommendation sent off a cascade of criticism and even lawsuits from groups with a stake in the outcome.

Nevertheless, those objections were overruled on Friday by Delaware Judge Leonard Stark. Stark confirmed the Amber bid, but numerous parties to the case, including representatives of Venezuela, said they plan to appeal.

According to Stark’s order, “the consideration to be provided by the buyer under the stock purchase agreement is fair, adequate, and reasonable consideration for the PDVH shares and constitutes an adequate price for the purchase of the PDVH shares under the terms of the Sale Procedures Order.”

Major creditors stand to benefit

If the sale goes through as planned, more than half a dozen creditors will get funds from the auction.

According to papers submitted earlier this week, Amber anticipates the acquisition to be finalised next year, subject to regulatory and Treasury Department approvals.

Creditors that are projected to benefit include oil giant ConocoPhillips, miners Crystallex and Rusoro Mining, and industrial conglomerates O-I Glass and Koch.

These enterprises, along with others who participated in earlier parts of the proceedings, have long sought reimbursement for losses caused by Venezuela’s defaults and asset seizures.

Buyer shielded from Venezuelan liabilities

Judge Stark also stated in his order that the buyer will not undertake any responsibilities relating to Citgo’s ultimate parent, Venezuela’s state-owned oil corporation PDVSA, or the Republic of Venezuela.

This section establishes a clear distinction between the acquired U.S.-based assets and the responsibilities of the Venezuelan government and its oil business.

A pivotal step, with appeals ahead

The court’s approval of the sale order marks a watershed moment in one of the most widely watched sovereign-related legal challenges in the US legal system.

After years of litigation and a convoluted auction process, the judge’s approval moves the transaction closer to completion.

However, expected appeals from Venezuela and other parties imply that legal battles will continue even as the sale is reviewed by regulators.

With the sale set to finalise next year and creditors awaiting final distribution of proceeds, the case remains a watershed moment in efforts to resolve Venezuela-related debt problems in US courts.

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