Citgo Auction Adviser Recommends Gold Reserve Bid

(Bloomberg) -- A court-appointed adviser is preparing to recommend a consortium led by Gold Reserve Ltd. as the best bidder for Citgo Petroleum Corp.’s parent company, according to people familiar with the matter, with a judge to make the final decision in the coming months.

The recommendation, by Special Master Robert Pincus, is due to become official by July 2 and is then subject to the approval of Judge Leonard Stark, who is presiding over the case in federal court in Delaware. The sale’s proceeds will help compensate creditors of Venezuela whose assets were seized when the government nationalized industries under the late President Hugo Chávez.

Gold Reserve’s group beat a $3.7 billion offer by Red Tree Investments LLC for Pincus’ preferred bid, said the people, asking not to be identified discussing private information. Red Tree had been selected earlier as the opening bidder for others to top. Among the others is Vitol Inc. 

Shares of Gold Reserve surged as trading began Wednesday and were up as much as 69% at 3:37 p.m. in New York. 

It’s still possible a new bid will come in and Pincus could make a different recommendation.

The recommendation marks an important step in a years-long legal battle over the assets of parent company PDV Holding. They are being auctioned off to satisfy more than $20 billion in claims against Venezuela and its state-owned oil company Petroleos de Venezuela SA, or PDVSA. Creditors including Canadian miner Crystallex International Corp. and US driller ConocoPhillips Co. are among those in line for the money. 

After facing many hurdles and delays, the auction is now nearing an end, with a hearing on the sale scheduled for Aug. 18. The judge may announce the winning bidder at the hearing or afterward. Meanwhile the other bidders can file briefs arguing for their offers.

The battle has been playing out for years and goes back to the fallout from Chávez’s asset seizures. Chávez died in 2013 and was succeeded by Nicolás Maduro. Affected companies, including holders of other kinds of debt, sought restitution in Delaware after securing judgments.  

Citgo runs refineries in the US as well as pipelines, terminals and fuel distribution channels.

The case is Crystallex International Corp. v. Bolivarian Republic of Venezuela, 17-mc-00151, US District Court, District of Delaware (Wilmington).

--With assistance from Nathan Risser.

(Updates with stock action in fourth paragraph and further context in fifth.)

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