Financial Alliances Form as Citgo Share Auction Approaches Final Stages

By Marianna Parraga

HOUSTON – This month, at least five investor groups participated in a U.S. court-ordered auction for shares in Citgo Petroleum’s parent company, with three groups securing financing commitments for the prized Venezuelan asset, according to sources familiar with the situation.

As this unprecedented auction approaches its conclusion, anticipated to raise up to $21.3 billion due to previous expropriations and debt defaults in Venezuela, a federal court officer is assessing bids from various large investors and creditors.

Prominent Wall Street banks, including JPMorgan and Morgan Stanley, along with investment firms such as Rothschild & Co and Elliott Investment Management, have arranged financing for several of these bids. Their involvement increases the likelihood of robust offers for Citgo, the seventh-largest oil refiner in the U.S., especially after an earlier auction round in January was labeled "disappointing" by representatives of Venezuela, which only yielded a highest bid of $7.3 billion.

This auction represents a pivotal point in a landmark case that has set new precedents regarding the enforcement of international arbitration awards and the lifting of sovereign and corporate immunities.

Venezuela’s Vice President Delcy Rodriguez expressed strong opposition to the auction, stating, "We reject the robbery of Citgo … Venezuela will not recognize any fraudulent transaction," in a recent social media post. Additionally, Venezuelan Oil Minister Pedro Tellechea urged the U.S. court to terminate the auction process.

The sale has drawn interest from notable investors and energy companies, such as Vitol, ConocoPhillips, and Koch Industries. However, JPMorgan, Morgan Stanley, Rothschild, Vitol, and ConocoPhillips declined to provide comments, and Koch, Citgo, and the boards overseeing the refiner did not respond to inquiries.

Since 2019, Citgo has been operating under U.S. protection after severing ties with its ultimate parent company, the Caracas-based state oil firm PDVSA. The three U.S. refineries owned by Citgo process up to 807,000 barrels of oil daily and have collectively generated $5.26 billion in net earnings over the last nine quarters.

The ongoing court process now permits bidders to continue structuring their financing, enhancing credit bids, and potentially increasing their offers by a minimum of $100 million to outperform competitors.

Results from the auction are expected to be announced in mid-July, in alignment with the court’s auction timeline. A July 2 update by the supervising court official, Robert Pincus, may reveal further details regarding the bids and participating investors. Pincus’s attorney, however, did not comment on the bidding procedures or results from the second round.

Some bidding groups are aiming to put forward cash-only offers, while certain creditors are merging credit bids with cash contributions. The court has permitted creditors to use the full value of their claims in the bidding process.

Gold Reserve has presented a $1 billion claim against Venezuela as part of its bid, according to statements from the company. Meanwhile, Rusoro Mining has engaged Rothschild as a financial advisor to enhance the value of its $1.3 billion claim, although a spokesperson declined to comment on the company’s participation in the auction.

Notably, representatives from Venezuela may request a third bidding round if they find the offers in the second round unsatisfactory, as indicated by sources familiar with their deliberations earlier this month.