A US judge has rejected motions filed by Venezuela and Canadian miner Gold Reserve to disqualify himself, a court-appointed officer, and two advising firms overseeing the auction of shares in the parent company of US refiner Citgo Petroleum.
These moves were submitted by Venezuela and Canadian miner Gold Reserve.
In one of the most carefully watched asset transactions connected to Venezuela’s protracted debt problems, the decision, which was revealed in a court filing on Thursday, eliminates a significant procedural obstacle.
Allegations of conflicts dismissed
Venezuela and Gold Reserve, who were bidding to take part in the auction arranged by the Delaware court, had alleged that firms advising the court had “conflicts of interest”.
The two claimed that advisory firms were paid approximately $170 million in fees by affiliates of Elliott Investment Management, the hedge fund whose bid was recommended by the auction results as the winning offer, as well as from bondholders who are entitled to benefit from the proceeds of the sale.
Both argued that such financial links undermined the neutrality of the process and called for the affected officials and advisers to be disqualified.
But the motions met with substantial resistance, and Delaware Judge Leonard Stark denied both as “procedurally defective” and “untimely.”
He also held that the arguments essentially were waived claims with no merit.
The ruling essentially let the sale of Citgo’s parent PDV Holding continue apace.
This auction, which merits global attention thanks to its scale and geopolitical importance, is intended to fulfil billions of dollars in court-awarded claims against Venezuela.
The sale process will proceed without interruption
Through a stay request, Gold Reserve, whose own bid was in the auction, had also attempted to stop the proceedings.
The move, which sought to halt the court’s assessment of Elliott’s $5.9 billion offer through its division Amber Energy, was also turned down.
Elliott’s plan was previously suggested as the best offer by Robert Pincus, the officer appointed by the court.
According to the Delaware order, the auction will proceed under its current structure, at least for the time being.
A possible end to years of legal battle over control of Citgo’s parent assets has been hinted at by Judge Stark’s prior declaration that he will decide a final winner by the end of November.
Broader legal battles remain
Venezuela and Gold Reserve are still pursuing other legal avenues, despite Thursday’s decision.
In other US courts, Gold Reserve has launched separate actions, including one at an appeals court, to stay or to overturn parts of the auction.
Both of those cases are still pending and could affect either the timing of the sale or how it gets enforced.
It is one piece of a larger plan to deal with approximately $19 billion in claims from 15 creditors.
Most of these claims are related to alleged defaults on debts and expropriations by Venezuela, some dating back more than a decade.
They consist of bondholders and companies that won arbitration payouts after the Venezuelan government nationalised their assets.
A turning point in Venezuela’s debt disputes
The Citgo auction is one of the most important moves to date in the US court efforts spearheaded by creditors seeking repayment from the cash-strapped nation. A Houston-based refiner, Citgo Petroleum, is Venezuela’s most prized foreign asset.
Its structure, held through PDV Holding, a Delaware corporation, has made it the primary target in lawsuits through which litigants are attempting to recover for defaults and expropriation-related debts of the country.
The motions by Venezuela and Gold Reserve were the latest effort to slow the process, but all this week, Judge Stark opted to race ahead against the delays.
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