Commodities and Futures News

Exclusive-Conoco emerges as surprise bidder in historic Citgo share auction

2024.02.09 09:56


© Reuters. An indication of Citgo Petroleum is seen at its headquarters in Houston, Texas, U.S., January 11, 2024. REUTERS/Go Nakamura

By Marianna Parraga and Gary McWilliams

HOUSTON (Reuters) – A U.S. court docket auction weighing the destiny of Venezuela-owned oil refiner Citgo Petroleum has acquired bids utilizing claims in lieu of money, in keeping with individuals aware of the method and paperwork, a part of a historic case to settle Venezuelan money owed.

Oil producer ConocoPhillips (NYSE:), the biggest creditor in the case after presenting the court docket with some $12 billion from asset expropriations in Venezuela, final month submitted a credit score bid utilizing its claims, the individuals stated. A spokesperson declined to remark.

Other bidders even have tried to use their claims towards Venezuela in bids, a Delaware court docket officer overseeing the auction has stated, which may go away much less money to be distributed among the many remaining collectors. The court docket has not disclosed particulars from a bidding spherical that acquired affords till Jan. 22.

Credit bids elevate the prospect of inadequate money to settle a complete of $21 billion in claims accepted by the court docket, inflaming some collectors sensing they might be neglected of a payout.

The claims stem from Venezuela’s expropriations and debt defaults because it nationalized power and mining firms greater than a decade in the past. Citgo turned enmeshed in the case when the court docket in a rare ruling discovered its mother or father PDV Holding accountable for the South American nation’s money owed.

Conoco exited oil refining 12 years in the past when it spun off Phillips 66 (NYSE:). It was unclear whether or not the credit score bid was positioned with one other firm or meant to safe Citgo belongings that might be damaged off.

In addition to Conoco, power firms Chevron (NYSE:), Reliance Industries, Koch Industries and Valero Energy (NYSE:), and no less than one activist investor have expressed curiosity in the gross sales course of, the individuals stated. Dozens of bidders started due diligence, in search of info for the non-binding first spherical, the individuals stated.

Conoco, Koch Industries and a board supervising Citgo declined to remark. Chevron, Reliance and Valero didn’t reply to requests for remark.

WHAT’S CITGO WORTH?

Credit bids elevate new issues in an already drawn-out court docket case that broke new authorized floor in disputes towards overseas international locations. Another issue is the uncertainty of Citgo’s honest worth, 4 funding bankers near the auction stated.

The oil refiner has been extremely worthwhile, however individuals near the bidding stated the mother or father’s shares may finally fetch about half of a market worth near $12 billion attributable to dangers of future lawsuits from collectors or Venezuela, different refineries available on the market, and the necessity for U.S. approvals.

Citgo’s earnings earlier than curiosity, taxes, depreciation and amortization, or EBIDTA, may fall to about $2.5 billion this yr based mostly on anticipated margins, affecting valuations, two of the sources stated.

The Houston-based firm operates an 807,000-barrel-per-day oil refining community unfold from Illinois to Texas, owns pursuits in pipelines and terminals, and provides gas to 4,200 impartial gasoline shops in the U.S.

Investment banker Evercore Group is overseeing the auction’s advertising and marketing and knowledge assortment, which has drawn early curiosity from dozens of firms and people in the primary part.

A second bidding spherical was tentatively scheduled for May. Evercore didn’t reply to a request for remark.

For the court docket to facet with a credit score bid, it could doubtless require the auction winner to make use of its management of Citgo to pay different collectors over time, one particular person near the matter stated.

“The restructuring will have to be in the hands of Conoco if it wins with a credit bid,” the particular person added.

CREDIT AND CASH

Conoco has three claims in the highest 15 of an inventory of collectors that U.S. Judge Leonard Stark has used to determine a “first-in-time” precedence order. Conoco has stated it goals to money about $10 billion from the three awards after deducting what it acquired beforehand.

Stark has dominated that credit score bids should embody “a cash component or other funding mechanism” to pay liens towards the Citgo mother or father’s shares.

Three Venezuela collectors and the court docket officer overseeing the method, Robert Pincus, final week stated in separate filings that the usage of multibillion-dollar claims as a part of bids threatens the court docket’s schedule.

Pincus stated accepting proposals by some collectors to alter their standing may complicate his efforts to guage the credit score bids towards others.

The collectors checklist additionally consists of miner Crystallex, which first launched the case in Delaware, teams of bondholders and corporations such as O-I Glass (NYSE:) and Siemens Energy. More collectors are attempting to hitch the case.

“Will the court have the courage to accepts a bid that only pays off a handful of creditors? That’s the issue,” one of many sources stated.

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