One of the largest US refiners changes hands after lengthy arbitration. US court approves Citgo takeover

A US court approved the transfer of ownership of Venezuelan company PDV Holding to investment group Elliott Investment Management. This brings one of the largest enforcement auctions of recent years to a close. The stakes include not only the repayment of Venezuela’s debts, but also the fate of a strategic asset that for decades gave Caracas access to the US oil market. The development comes as Washington steps up political pressure on the Venezuelan regime and security in the region once again deteriorates.

Shares in Venezuelan company PDV Holding, the parent company of US refiner Citgo Petroleum, are to be transferred to Amber Energy, a subsidiary of Elliott Investment Management. This is a key step in a court-organised auction aimed at monetising Venezuela’s stake in Citgo and satisfying claims by a group of creditors who prevailed in arbitrations and lawsuits over expropriated assets and unpaid obligations.

The purchase price was 5.9 billion dollars, the result of a court-supervised, two-year auction designed to pay off creditors with claims against Venezuela. The court’s decision is the final major legal step towards concluding the process.

Citgo is the third-largest independent refiner in the United States

The combined nameplate capacity of all three refineries operated by Citgo (Lake Charles in Louisiana, Corpus Christi in Texas and Lemont in Illinois) stands at approximately 807,000 barrels of oil per day. That volume of oil can produce roughly twice the Czech Republic’s daily consumption of motor fuels, or enough fuel for more than 10 million cars.

Citgo also operates an extensive logistics network across the US, including pipeline systems, terminals and its own distribution infrastructure. Its geographical footprint allows it to supply several key US regions, making it an important link in the supply of fuels, gasoline and aviation kerosene.

The change of ownership is therefore being closely watched by oil traders, investment funds and politicians. The transaction was announced as the current US administration steps up pressure on Venezuela and security in the region deteriorates. 

Citgo has historically been a strategic asset for Venezuela. Its loss significantly weakens PDVSA’s foreign revenues and effectively cuts Venezuela off from the US market, which was crucial to Caracas.

The dispute dates back to 2017

The case began in 2017, when Canadian mining company Crystallex successfully sued Venezuela over the expropriation of its gold mining project. A court in Delaware subsequently ruled that Venezuela’s obligations could be partially secured by its US assets—specifically, its stake in PDV Holding, the company that owns Citgo.

The ruling opened the door to other creditors, many of whom had claims stemming from expropriated assets or unpaid Venezuelan government bonds. More than 15 companies eventually joined the proceedings, making this one of the largest mass enforcement auctions in modern US history.

The winning bid from Amber Energy, a subsidiary of Elliott Investment Management, also included a commitment to pay 2.1 billion dollars to holders of Venezuela’s defaulted bonds. This was a key point for many creditors, as it represented one of the few realistic ways to recover at least some of their money.

The decision prompted a number of objections. Venezuela and some companies questioned the fairness of the auction and sought to overturn the sale, but Judge Leonard Stark rejected all the major objections. Some parties are nevertheless expected to appeal.

According to the court, Amber’s bid is “fair, reasonable and reflects the market value of PDV Holding shares”. If the transaction receives regulatory approval from the US Treasury Department, it should be completed next year. The proceeds will then be distributed among major creditors, including ConocoPhillips, Crystallex, Rusoro Mining, O-I Glass and Koch Industries. Once the sale is completed, the new owner will not assume any obligations of Venezuela, PDVSA or other state entities.

Elliott Investment Management is an influential activist hedge fund.  The company is known for its ability to significantly influence the strategy of companies in which it acquires a stake, from technology firms to energy companies. In recent years, it has been among the key investors urging major oil companies, including BP and Occidental, to focus more on efficiency and financial discipline.