Factbox: Which creditors will have priority for Citgo share auction?

Rusoro Mining

27/07/2023 21:25

By Marianna Parraga
       HOUSTON, July 27 (Reuters) - A U.S. judge has given
priority to miner Crystallex International to cash proceeds from
a proposed auction of shares in one of the parents of
Venezuela-owned refiner Citgo Petroleum, while granting oil
producer ConocoPhillips  COP.N  a position "near the front of
the line." 
    Judge Leonard Stark from Delaware on Thursday established
criteria for organizing dozens of creditors lining up to take
part in the auction, whose launching date was set for Oct. 23
and is expected to be completed a year after.
    The court reviewed more than 60 briefs with proposals of how
to organize the creditors and bondholders that have claims
against Venezuela from asset expropriations and debt defaults.
    Citgo Petroleum operates the U.S. seventh-largest refining
network, including three refineries, terminals, pipelines and
other facilities valued between $10 billion and $13 billion. But
creditors that have resorted to U.S. courts are claiming more
than $20 billion.
    This is the priority order and the participation criteria
established by Stark:
    
    CRYSTALLEX IS FIRST
    Because Crystallex introduced its claim in Delaware six
years ago, becoming the first creditor with an arbitration award
against Venezuela to resort to a U.S. court, and is the only one
that has completed all steps to seize property owned by PDVSA
for eventual sale, the court has given it priority.
    Crystallex obtained a writ of attachment in August 2018,
allowing it to pursue shares in Delaware-registered PDV Holding,
one of the subsidiaries caught between Caracas-headquartered
state oil company Petroleos de Venezuela and its Houston-based
unit Citgo Petroleum.
    More than a dozen additional creditors collectively holding
judgments of some $5 billion have tried to follow the same path,
but have been prevented by U.S. sanctions on Venezuela. The
court has given some of them conditional writs of attachment,
while others are still trying to be recognized by the court as
additional creditors.
    
    AWARDS, WRITS IN HAND
    Any additional creditors must have international arbitration
awards linked to claims from asset expropriations, debt defaults
or contract terminations in Venezuela. 
    Those awards must be filed at a U.S. court to receive
judgments to enforce the claims. A creditor who obtains
favorable final judgment holding a debtor liable for damages
must then register it in Delaware or any other court where the
debtor has property.
    The creditor must then move for a writ of attachment. The
date when the writ is requested will be used to set the priority
order in the auction. The court will set a deadline for
obtaining a writ before the auction. The writs are ultimately
issued by the U.S. Marshals Service. 
    Besides Crystallex, companies with writs of attachment in
hand are ConocoPhillips, Red Tree Investments, Siemens, O-I
Glass  OI.N , Huntington Ingall Industries  HII.N , ACL1
Investments, Rusoro Mining  RML.V , two units of Koch Industries
and Gold Reserve  GRZ.V .
    
    PAYMENT PRIORITY
    Delaware law concerning the enforcement of money judgments
generally requires that sale proceeds be distributed according
to a "first in time, first in line" priority. In this case, the
court is also taking into account the unique factors of the
Venezuela case.
    The court has so far determined that "Crystallex is first in
line." It also said the priority of any additional judgments
will be based on the date on which a creditor moved for a writ
of attachment, if ultimately granted.
    For Conoco, the court gave the firm a position "near the
front of the line" because it has participated in the litigation
for years, provided valuable input and paid one third of
transaction expenses. Conoco filed in 2019 for a writ of
attachment, which was granted last year.

 (Reporting by Marianna Parraga; Editing by Daniel Wallis)
 ((marianna.parraga@thomsonreuters.com; +1 713 371 7559; Reuters
Messaging: @mariannaparraga))