Conoco emerges as surprise bidder in historic Citgo share auction

O-I Glass

09/02/2024 14:32

By Marianna Parraga and Gary McWilliams
       HOUSTON, Feb 9 (Reuters) - A U.S. court auction weighing
the fate of Venezuela-owned oil refiner Citgo Petroleum has
received bids using claims in lieu of cash, according to people
familiar with the process and documents, part of a historic case
to settle Venezuelan debts. 
    Oil producer ConocoPhillips  COP.N , the largest creditor in
the case after presenting the court with some $12 billion from
asset expropriations in Venezuela, last month submitted a credit
bid using its claims, the people said. A spokesperson declined
to comment. 
    Other bidders also have tried to apply their claims against
Venezuela in bids, a Delaware court officer overseeing the
auction has said, which could leave less cash to be distributed
among the remaining creditors. The court has not disclosed
details from a bidding round that received offers until Jan. 22.
    Credit bids raise the prospect of insufficient cash to
settle a total of $21 billion in claims accepted by the court,
inflaming some creditors sensing they could be left out of a
payout. 
    The claims stem from Venezuela's expropriations and debt
defaults since it nationalized energy and mining companies more
than a decade ago. Citgo became enmeshed in the case when the
court in an extraordinary ruling found its parent PDV Holding
liable for the South American nation's debts.  
    Conoco exited oil refining 12 years ago when it spun off
Phillips 66. It was unclear whether the credit bid was placed
with another company or intended to secure Citgo assets that
could be broken off. 
    In addition to Conoco, energy companies Chevron  CVX.N ,
Reliance Industries  RELI.NS , Koch Industries and Valero Energy
 VLO.N , and at least one activist investor have expressed
interest in the sales process, the people said. Dozens of
bidders began due diligence, seeking information for the
non-binding first round, the people said.
    Conoco, Koch Industries and a board supervising Citgo
declined to comment. Chevron, Reliance and Valero did not reply
to requests for comment.
        
  
    WHAT'S CITGO WORTH? 
    Credit bids raise new complications in an already drawn-out
court case that broke new legal ground in disputes against
foreign countries. Another factor is the uncertainty of Citgo's 
fair value, four investment bankers close to the auction said. 
        The oil refiner has been highly profitable, but people
close to the bidding said the parent's shares could ultimately
fetch about half of a market value close to $12 billion due to
risks of future lawsuits from creditors or Venezuela, other
refineries on the market, and the need for U.S. approvals. 
    Citgo's earnings before interest, taxes, depreciation and
amortization, or EBIDTA, could fall to about $2.5 billion this
year based on expected margins, affecting valuations, two of the
sources said.
    The Houston-based company operates an 807,000-barrel-per-day
oil refining network spread from Illinois to Texas, owns
interests in pipelines and terminals, and supplies fuel to 4,200
independent gasoline outlets in the U.S.      
    Investment banker Evercore Group is overseeing the auction's
marketing and data collection, which has drawn early interest
from dozens of companies and individuals in the first phase. 
    A second bidding round was tentatively scheduled for May.
Evercore did not reply to a request for comment. 
    For the court to side with a credit bid, it would likely
require the auction winner to use its control of Citgo to pay
other creditors over time, one person close to the matter said. 
    "The restructuring will have to be in the hands of Conoco if
it wins with a credit bid," the person added. 
    
    CREDIT AND CASH 
        Conoco has three claims in the top 15 of a list of
creditors that U.S. Judge Leonard Stark has used to establish a
"first-in-time" priority order. Conoco has said it aims to cash
about $10 billion from the three awards after deducting what it
received previously.
    Stark has ruled that credit bids must include "a cash
component or other funding mechanism" to pay liens against the
Citgo parent's shares. 
    Three Venezuela creditors and the court officer overseeing
the process, Robert Pincus, last week said in separate filings
that the use of multibillion-dollar claims as part of bids
threatens the court's schedule.   
    Pincus said accepting proposals by some creditors to change
their status could complicate his efforts to evaluate the credit
bids against others.
    The creditors list also includes miner Crystallex, which
first introduced the case in Delaware, groups of bondholders and
companies such as O-I Glass  OI.N  and Siemens Energy
 ENR1n.DE . More creditors are trying to join the case.
    "Will the court have the courage to accepts a bid that only
pays off a handful of creditors? That's the issue," one of the
sources said.

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GRAPHIC- Creditors cleared to take part in Citgo parent's share
auction    https://graphics.reuters.com/CITGO-AUCTION/CREDITORS/myvmknxyavr/
Interest jumps in US auction of shares in parent of
Venezuela-owned Citgo      urn:newsml:reuters.com:*:nL1N3E82HL
FACTBOX-Venezuela creditors with top priority in Citgo share
auction     urn:newsml:reuters.com:*:nL1N3ED29B
US court clears Altana Fund to take part in auction of shares in
Citgo parent     urn:newsml:reuters.com:*:nL1N3EE1UT
Venezuela pursues debt settlement with Crystallex, Conoco,
bondholders     urn:newsml:reuters.com:*:nL1N38K2FD
Conoco among top creditors in Citgo auction     https://tmsnrt.rs/3vKQglY
A tale of setbacks as Venezuela's Citgo heads to US auction    
https://www.reuters.com/business/energy/tale-setbacks-venezuelas-citgo-heads-us-auction-2023-10-22/
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 (Reporting by Marianna Parraga and Gary McWilliams; Additional
reporting by Ron Bousso and Sabrina Valle; Editing by Jonathan
Oatis)
 ((marianna.parraga@thomsonreuters.com; +1 713 371 7559; Reuters
Messaging: @mariannaparraga))