US court officer moves to block creditors from derailing Citgo auction
2024.09.09 19:55
By Marianna Parraga
HOUSTON (Reuters) – A U.S. federal court officer overseeing an auction of shares in the parent of Venezuela-owned refiner Citgo Petroleum on Monday asked the judge in the case to prevent creditors from pursuing additional lawsuits that could derail the sales process.
Three creditors that had registered claims with the court but are unlikely to receive auction proceeds have filed separate lawsuits this year seeking to recoup billions of dollars from defaulted Venezuelan bonds. The three – Gramercy Distressed Opportunity Fund, G&A Strategic and Girard Street Investments – are related companies.
The parallel lawsuits have complicated the auction in U.S. District Court, Delaware, which aims after several delays to select a winner this month and complete a sale in November.
The case was first introduced in Delaware in 2017 by miner Crystallex and has since allowed another 17 creditors including bondholders to pursue shares in Citgo’s parent, PDV Holding.
However, bids received thus far would not cover the $21.3 billion in claims registered with the Delaware court. Citgo has been valued at between $11 billion and $13 billion, and the highest offer in a first bidding round in January was $7.3 billion.
The situation has prompted some creditors to file lawsuits in other courts. Gramercy, Girard Street and G&A claims are close to the bottom of the list of companies likely to receive sales proceeds.
Reuters could not immediately reach the companies for comment.
“Certain judgment creditors are seeking to circumvent this court’s sale process – notwithstanding their previous participation in that process – by bringing last-minute lawsuits in other forums,” court officer Robert Pincus wrote in his request to the judge in the case.
“This threatens to undermine the sale process to the detriment of creditors who followed the court’s process,” he added. Bidders are concerned about the risk that creditors will later lay claim to the assets they are attempting to acquire, he said.
Pincus’ request will be “very difficult to meet,” said lawyer Jose Ignacio Hernandez from consultancy Aurora Macro Strategies, since the Delaware court does not have jurisdiction over lawsuits in other states.
