A U.S. court officer overseeing an auction of shares in the parent company of Venezuela-owned refiner Citgo Petroleum is recommending that a judge accept a $3.7 billion offer from an affiliate of Contrarian Funds to establish the baseline for a new bidding round this year, as detailed in a recent court filing.
Four potential "stalking horse" bids for shares in Citgo's parent, PDV Holding, were submitted by the March 7 deadline. The offer from Red Tree Investments, the Contrarian Funds affiliate, has been favored by the special master in charge of the auction. Judge Leonard Stark must approve or reject the recommendation before the auction can proceed.
The filing notes that Red Tree's proposed transaction has the second highest purchase price and is viewed by the special master as having the least conditionality, making it the best available option.
The Delaware court opted to establish a minimum bid for PDV Holding after creditors largely dismissed a highly conditional $7.3 billion offer from an affiliate of Elliott Investment Management during an auction last year.
Following the establishment of a starting bid, a period for competitive bids will follow, with a final hearing scheduled for July.
By setting this initial bid, Stark aims to maximize returns for creditors in this lengthy case, which has previously determined PDV Holding's liability for Venezuela's debts. Caracas-headquartered PDVSA serves as Citgo's ultimate parent company.
If successful, the stalking horse bidder would acquire 100% of PDV Holding's shares, with the proceeds earmarked for distribution to creditors at closing. The proposed transaction includes $3.24 billion in cash and $458 million in non-cash consideration.