Elliott Affiliate’s $6 Billion Citgo-Shares Bid Wins Auction

Core Points - An affiliate of Elliott Investment Management, Amber Energy, won a court-ordered auction for control of Citgo Petroleum Corp., which is considered Venezuela's most valuable foreign asset [1][2] - The US District Judge Leonard Stark approved Amber Energy's bid of $5.89 billion, stating it was the highest and best offer after a lengthy auction process [2][3] - The judge emphasized that the Amber bid provided the best combination of price and certainty of closing, and it was neither grossly inadequate nor manifestly unjust [3] Financial Implications - Following the announcement, PDVSA bonds due in 2020, which are backed by shares in a PDV Holding affiliate, increased in value, trading slightly above par [4] - The deal with Amber will allow bondholders to be paid off with $1.68 billion in cash at the closing of the sale, as they will release their pledge against the company [4] Company Operations - Citgo operates refineries, pipelines, terminals, and fuel distribution channels in the US, and is a subsidiary of PDV Holding, which is controlled by Venezuela's political opposition [7] - The political opposition represents PDVSA in US courts due to the lack of recognition of President Nicolas Maduro's government by the US [7] Legal Context - The auction process has faced controversy, with Gold Reserve Ltd. attempting to disqualify the judge and special master, claiming favoritism towards Amber [8] - Despite these claims, Judge Stark and Special Master Robert Pincus were not disqualified, and the auction process continues with a deadline for last objections set for November 28 [6][9] Historical Background - The legal battle over Citgo is part of a long-standing issue involving various creditors, including Canadian miner Crystallex International Corp. and US driller ConocoPhillips Co., seeking compensation for losses from the nationalization of their assets in Venezuela [10]