US Judge Orders Reopening of Citgo Data Room, Restarting Bidding Process

In a significant development in the ongoing saga of Venezuela-owned oil refiner Citgo Petroleum, a US judge has ordered the reopening of the Citgo data room, restarting the bidding process for the company's shares. This move comes after a previous attempt to sell the company's assets was met with criticism and legal challenges.

The decision to reopen the data room was made by Judge Leonard P. Stark, who is overseeing the court-mandated auction of Citgo's shares. The auction was initially organized to satisfy a number of claims against Venezuela totaling US $21.3 billion. The process was brought forward by Canadian miner Crystallex, which is seeking to collect on an international arbitration award.

The reopening of the Citgo data room will provide potential bidders with access to crucial financial and operational information, enabling them to make more informed decisions about their offers. This transparency is expected to drive up competition and potentially lead to higher bids for the company's shares.



The availability of this data could also attract new bidders, increasing competition and driving up the final sale price. However, the reopening of the data room may also extend the timeline for the bidding process, as bidders reassess their strategies and submit revised offers.



The court-appointed "Special Master" Robert B. Pincus and investment bank Evercore, hired as a consultant, will review the auction proposals. Barring schedule changes, Judge Stark will issue his final decision on July 15. The winning bidder will require US authorization to execute the sale, but the Treasury Department has promised a "favorable licensing policy."

The present CITGO board might lobby the court to open a third round of bidding if offers remain far from the company's $11-13 billion valuation. The highest amount put forward in the first round was just $7.3 billion.

The US-backed hardline opposition has exercised control over Venezuela's most prized foreign asset since 2019 and has drawn criticism for a string of actions that have precipitated a likely change of ownership for Venezuelan state-owned CITGO. The Guaidó-led sector failed to show up in court and allowed ConocoPhillips to get a green light to enforce its biggest award. Additionally, both Stark and the Third Circuit Court of Appeals approved the so-called "alter ego" argument, allowing more corporations to tag their claims to the ongoing auction, on the basis of actions and statements by the "interim government."

In recent weeks, Venezuelan opposition operators and allied US politicians have called on the Biden administration to intervene in the court-mandated CITGO sale to shield anti-government factions from a political cost in the Caribbean nation's July 28 presidential elections. On Monday, the Maduro government issued a statement rejecting the "plundering" of CITGO as "another episode of the US’ multi-pronged aggression against Venezuela." Caracas vowed not to recognize the sale and to take necessary action against actors involved in the process.

Apart from the Delaware procedure, CITGO is also liable to owners of the defaulted PDVSA 2020 bond after 50.1 percent of the company's shares were pledged as collateral. The US Treasury has stepped in to stop bondholders from executing the collateral, with the protection due to expire if the oil subsidiary changes ownership.

A subsidiary of Venezuela’s state oil company PDVSA, CITGO owns more than 4,000 service stations and three refineries with a combined processing capacity of 769,000 barrels per day (bpd). The Corpus Christi (Texas) refinery is allegedly seen as the firm’s most desirable asset by interested parties.

The reopening of the Citgo data room and the restarting of the bidding process are expected to have significant implications for the company's future and the ongoing political and economic tensions between the United States and Venezuela. As the process unfolds, investors and stakeholders will be closely watching the developments, eager to see how the situation plays out and what impact it will have on the global energy landscape.