By Marianna Parraga HOUSTON (Reuters) -A U.S. federal judge on Monday confirmed a $3.7 billion offer by Contrarian Funds’ affiliate Red Tree Investments as the starting bid in an auction of shares in the parent of Venezuela-owned refiner Citgo Petroleum to pay creditors and bondholders, according to a court filing. The offer, which had been […]
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US judge confirms Red Tree’s offer as starting bid in Citgo parent’s auction
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By Marianna Parraga
HOUSTON (Reuters) -A U.S. federal judge on Monday confirmed a $3.7 billion offer by Contrarian Funds’ affiliate Red Tree Investments as the starting bid in an auction of shares in the parent of Venezuela-owned refiner Citgo Petroleum to pay creditors and bondholders, according to a court filing.
The offer, which had been recommended by a court officer overseeing the auction, unleashed a battle among 16 creditors seeking to cash proceeds from the auction, with some supporting the bid because it includes a payment agreement with holders of a bond issued by Citgo’s ultimate parent, Caracas-headquartered PDVSA, and others saying it was too low.
A consortium led by miner Gold Reserve, which had submitted a $7.1 billion rival bid, other creditors and lawyers representing Venezuela in the eight-year-long case in Delaware filed objections to Red Tree’s bid, which were overruled by U.S. District Judge Leonard Stark.
“Red Tree’s bid constitutes the best balance of the evaluation criteria, which may be fairly summarized as price and certainty of closing,” Stark said in his decision, adding that the offer should encourage competition.
The judge asked court officer Robert Pincus to propose a period for topping off Red Tree’s offer, which is expected to lead to the selection of a winning bid in the auction, whose final hearing is scheduled for July.
Pincus was instructed by the judge to place “greater emphasis on price and lesser emphasis on certainty” in his final bid recommendation.
In a previous bidding round last year, most creditors rejected a $7.3 billion offer by an affiliate of hedge fund Elliott Investment Management due to conditions included.
Choosing Red Tree’s bid as stalking horse this time is expected to encourage competing proposals to pay up to $3 billion to the holders of PDVSA’s 2020 bonds, which were collateralized with Citgo equity.
Citgo has been valued at between $11 billion and $13 billion, with final offers in the auction expected to remain below $8 billion. The more that is paid to the bondholders, the less that will be left to distribute to other creditors, which include foreign oil producers, mining companies and industrial conglomerates whose Venezuelan assets were expropriated.
(Reporting by Marianna Parraga; Editing by Chris Reese and Leslie Adler)