US court gets 12 preliminary bids in Citgo share auction

By Marianna Parraga and Tom Hals

HOUSTON/WILMINGTON (Reuters) -A U.S. court is weighing 12 initial bids from private investment funds and companies participating in an auction of shares of refiner Citgo Petroleum’s parent, a court officer said on Tuesday, a level of interest Citgo called “disappointing.”

Creditors claiming billions of dollars for past expropriations in Venezuela and defaulted debt have flocked to U.S. courts to have arbitration awards and rulings enforced through an auction of shares in a parent of the South American country’s foreign crown jewel, Houston-based Citgo Petroleum.

Claims before the court exceed $22 billion, much greater than the $11 billion-$13 billion market value estimated for Citgo, the seventh largest U.S. oil refiner by volume.

Even through Judge Leonard Stark has underlined the need to “draw a line” to avoid more companies rushing to join the sales process after court deadlines expired, a final list of creditors and their priority has not been finalized or publicly disclosed.

The court and investment banker Evercore Group, selected to market the shares, initially identified 90 parties that could participate in the first bidding round, which received bids through Jan. 22.

About 30 parties signed non-binding agreements and received marketing information and a Citgo financial model, and 12 submitted indications of interest, a representative for court officer Robert Pincus said in a hearing.

The bidders were not identified because the court has sealed the bidding process. The court officer described them as private investment funds and companies engaged in petroleum refining and related industries.

“The indications of interest are quite disappointing. And we’re working hard to see if they can be raised, but we have a great deal of concern and where we are at this point,” said Nathan Eimer, a lawyer representing Citgo and parent PDV Holding, during the hearing.

Citgo requested seven days to analyze the proposals, which was granted by judge Stark. Some creditors might object the bids, according to comments at the hearing.

The sale, expected to be one of the largest U.S. court auctions, was launched last October to settle a legal battle first introduced in Delaware in 2017 by Canadian miner Crystallex Corp. Over a dozen other creditors have attached their judgments to the case.

The court has received bids using claims in lieu of cash, including from the largest creditor, ConocoPhillips, people familiar with the process told Reuters earlier this month.

Conoco exited oil refining 12 years ago when it spun off Phillips 66. It remains unclear whether the credit bid was placed with another company or intended to secure Citgo assets that could be broken off.

A lawyers representing Citgo’s parent said an objection to one of Conoco’s judgments and the total amount claimed by the company will be filed soon. If accepted, that could ultimately reduce the scope of the case.

In addition to Conoco, energy companies Chevron (CVX.N), Reliance Industries, Koch Industries and Valero Energy, and at least one activist investor have expressed interest in the sales process, the people said.

(Reporting by Marianna Parraga and Tom Hals; editing by Gary McWilliams, Alexandra Hudson and Nick Zieminski)