Today we’re going to dig into the Citgo auction, which started some seven years ago.
A winner was supposed to be named this month. However, that isn’t likely to happen, according to Reuters reporter Marianna Parraga, who last week uncovered some of the complexities around the latest submitted bids that could delay the review process for a couple months.
The July 15 deadline for completing the auction was important because it would have come before Venezuela’s presidential election on July 28. The auction itself is a historic case that has broken new legal ground in the enforcement of international arbitration awards, cracking sovereign and corporate immunity.
Citgo is the seventh-largest U.S. oil refiner. It operates three refineries in the United States that process up to 807,000 bpd of crude oil as well as a network of storage terminals and pipelines.
In 2019, it severed ties with its parent company PDVSA, the Caracas-headquartered state oil company of Venezuela.
This auction is intended to satisfy up to $21.3 billion in claims against Venezuela for expropriations and debt defaults.
The first bidding round for shares in one of the parent companies, PDV Holding, that would decide Citgo’s fate occurred in January, but those bids were weak.
The Delaware court discussing the auction might need to rethink how to sell the shares in Citgo’s parent after the highest bid it received in the first bidding round was 7.3$ billion, enough to cover only a third of the claims it has approved.
In a second round, at least five groups of investors submitted binding bids last month, with three securing financing commitments. These include Wall Street banks JPMorgan and Morgan Stanley and advisors and investors Rothschild & Co and Elliott Investment Management.
Reminder: Elliott Investment Management took a $1 billion stake in U.S. refiner Phillips 66 and called for additions to its board of directors and a focus on improving its oil refining business.
These bids, however, were complex, with some combining cash with credit bids from some of the 18 creditors cleared by the court. This could delay the review process until September.
Refinery deals have been few and far between in recent years. The assets are expensive, old, and face a threat from a shift to renewable energy and things like electric vehicles.
Some industry metrics show that plant valuations are down a third since the global financial crisis of 2008.
