Citgo assets draw more claimants as sale begins

US refiner Citgo's parent company has gone on the auction block this week but the US federal court that ordered the sale is dealing with an onrush of claimants seeking to benefit from proceeds.

A total of 26 claimants have so far registered with the court, having filed claims amounting to more than $21bn. The US District Court for the District of Delaware today allowed one more claim, by US investment fund Altana, but judge Leonard Stark who presides over the case suggested that further claims would face a higher hurdle.

Only those that had filed their claims against Venezuela well in advance of the 12 January deadline set by the court would be allowed to join the queue of claimants pursuing a piece of Citgo sale proceeds, Stark said at a court hearing today. The court may allow limited exceptions if claimants prove they were prevented from meeting that deadline, Stark said.

First bids for Citgo parent PdV Holding (PdVH) were due on 22 January, and "the sale is not scheduled to occur until July," Stark said.

Citgo, with 805,000 b/d in capacity at three US refineries, has become a target of takeover by dozens of creditors looking to satisfy claims both against Venezuelan state-owned PdV — Citgo's ultimate owner — and the Venezuelan government. The court process started in 2017 to satisfy a $990mn claim by defunct Canadian mining firm Crystallex, now owned by New York hedge fund Tenor Capital. ConocoPhillips has registered three claims totalling almost $12bn. The next largest claim is by Russian-Canadian gold miner Rusoro, while energy company Koch's minerals arm is chasing a $457mn claim.

The legal wrangling over Citgo is unlikely to conclude even if the Delaware court successfully executes the sale. Separate US court proceedings involve holders of $3.4bn in PdV 2020 bonds guaranteed by 50.1pc in Citgo Holding — a PdVH-owned legal entity that directly owns Citgo. The US government has blocked the bondholders' ability to pursue the claim, most recently issuing a ban that is valid until mid-April.

Separately, there is an inconvenient question of who exactly is the ultimate owner of Citgo. The company since 2019 operated under direction of the board appointed by the Venezuelan opposition and vetted by the US government. The Venezuelan opposition at that time claimed to be its country's legitimate government, a status accepted by the US government until 2022. Parent company PdV has always remained under the control of Venezuelan president Nicolas Maduro's government.

Citgo is an "alter ego" — a legal equivalent — of PdV and the Venezuelan government for the purpose of satisfying outstanding claims in US courts, Stark said today, regardless of whether it is Maduro or the opposition who are in charge.

The auction will determine whether the sum of all claims against Citgo's parent exceeds the company's value. The court has a ranking of claims, placing Crystallex's claim and one of the three ConocoPhillips claims, valued at $1.5bn, at the top of the list.

US investment bank Wells Fargo has pegged the enterprise value of Citgo's assets at $6.5bn-$14bn.

The court-appointed "special master" presiding over the auction has concluded that the sale would generate the highest revenue if the company is sold as a whole. Few peers of Citgo have publicly expressed interest in a wholesale takeover but there may still be interest in specific parts of the seventh-largest US refiner.

By Haik Gugarats