Gold Reserve's $7.4bn bid has been chosen by a US federal court-appointed official as the winner in an auction to buy US refiner Citgo, according to court documents released today.
Bermuda-based Gold Reserve's proposal was made through its US subsidiary Dalinar Energy and was supported by a consortium of creditors that includes Koch Minerals, Koch Nitrogen International and Rusoro Mining. The Gold Reserve proposal was also supported by JPMorgan Chase Bank and TD Bank.
The Gold Reserve offer was the highest bid that met various other requirements, the court-appointed special master overseeing the auction process said in a filing released Thursday in the US District Court for the District of Delaware. The bid includes a combination of equity and debt financing.
Citgo's three refineries, as well as its lubricant plants and its midstream and retail assets are being auctioned to satisfy debts owed by Venezuela state-owned PdV.
Gold Reserve executive vice chairman Paul Rivett said its bid "satisfies creditors further down the waterfall than was ever contemplated by any prior bid" since the inception of the sale process.
The deal is subject to regulatory approvals, including by the US Department of Treasury' s Office of Foreign Assets Control (OFAC). The US District Court for the District of Delaware has scheduled an 18 August hearing on the sale.
A US federal judge in April approved Contrarian Capital Management's $3.7bn proposal as the stalking horse bid in the auction, setting a floor for other proposals.
Gold Reserve protested the choice of the Contrarian bid after its own initial $7.08bn bid was not recommended. Other creditors also raised objections to the choice of Contrarian's bid, as did lawyers representing Venezuela.
Gold Reserve subsequently submitted the revised topping bid of $7.4bn which was picked in the final recommendation.
Other bidders in the Citgo auction included investment firm Black Lion Capital Advisors, which submitted an $8bn cash bid.
Black Lion submitted the bid on behalf of a group of partners led by Quazar Investment, Anex Management and Fortress Management, according to a letter filed with the court last month.
Trading firm Vitol was also a bidder in the auction but the terms of the bid were not public.
Amber Energy, which is backed by hedge fund Elliott Investment Management, was considering rejoining the bidding, a source familiar with the matter told Argus last month.
Last year, Amber Energy was the top bidder in the Citgo auction with a bid of $7.3bn. But the recommendation did not receive support from the "sale process parties" or "additional judgment creditors" and the court officer pivoted to another round of bidding, according to court filings.
A federal judge this year restarted the Citgo sale with a new auction process.
The US last month extended protections that shield Citgo from being taken over by a group of bondholders of Venezuela's PdV. The bondholders contractually hold a superior claim to 50.1pc of Citgo Holding — a legal entity that directly owns Citgo and, in turn, is owned by Citgo parent company PdVH, a subsidiary of PdV.
OFAC extended the protections until 20 December. The protections have been in place for more than five years through continuous extensions.
Gold Reserve has previously asked the court to request more clarity from OFAC on whether the agency intends to continue the protections beyond the expected closing of the Citgo sale transaction. OFAC previously signaled it would not get in the way of the auction.
Even though it is owned by PdV, Citgo since 2019 has operated under a board appointed by the Venezuelan opposition and vetted by the US government after the US rejected Venezuela's 2018 presidential election as illegitimate. PdV remains under control of President Nicolas Maduro's government.
Maduro's government has rejected the US court proceedings to sell Citgo as "theft".
