Court Officer Seeks to Halt Lawsuits in Citgo Auction Amid Creditor Concerns
A U.S. court official has requested prevention of additional lawsuits in the Citgo auction process. The move aims to address creditor concerns and maintain the integrity of the ongoing sale proceedings.
In a recent development, a U.S. federal court officer overseeing the auction of shares in CITGO Petroleum's parent company has requested the presiding judge to prevent creditors from initiating additional lawsuits. This move comes as an attempt to safeguard the ongoing sales process from potential disruptions.
The auction, which has faced several delays, is now scheduled to select a winner this month, with the sale expected to conclude in November 2024. The case, originally introduced in Delaware in 2017, has since expanded to include 18 creditors pursuing shares in PDV Holding, CITGO's parent company.
Three creditors - Gramercy Distressed Opportunity Fund, G&A Strategic, and Girard Street Investments - have filed separate lawsuits this year, seeking to recover billions from defaulted Venezuelan bonds. These actions have complicated the auction process, prompting concerns among potential bidders about future claims on acquired assets.
The situation is exacerbated by the fact that current bids fall short of covering the $21.3 billion in claims registered with the Delaware court. CITGO, valued between $11 billion and $13 billion, received a highest offer of $7.3 billion in the initial bidding round in January 2024.
"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. This threatens to undermine the sale process to the detriment of creditors who followed the court's process."
It's worth noting that CITGO has a rich history dating back to 1910 when it was founded as Cities Service Company. The company operates approximately 4,500 retail outlets in the U.S. and has three refineries with a total refining capacity of about 769,000 barrels per day. CITGO's iconic sign in Boston's Kenmore Square has been a landmark since 1965, symbolizing its long-standing presence in the American energy landscape.
The current legal complexities surrounding CITGO are part of a broader context involving U.S. sanctions on Venezuela's state-owned oil company PDVSA, which acquired full ownership of CITGO in 1990. These sanctions, imposed in 2019, have significantly impacted CITGO's operations and corporate structure.
As the auction process continues, the court's decision on preventing additional lawsuits will be crucial in determining the future of this major player in the U.S. energy sector. The outcome will not only affect creditors and potential buyers but also have implications for CITGO's extensive network of employees, customers, and community programs across the United States.
