Elliott affiliate raises bid for Citgo parent as competition heats up

By Marianna Parraga

HOUSTON, Aug 13 (Reuters) - An affiliate of hedge fund Elliott Investment Management has raised its bid for the parent of Venezuela-owned refiner Citgo Petroleum to a total value of $8.82 billion, according to a filing providing an update on the U.S. court-organized auction.

The complex auction of PDV Holding, meant to repay 15 creditors for debt defaults and expropriations by Venezuela and state oil company PDVSA, was relaunched in January after a year-long bidding process ended amid arguments over Citgo's worth and parallel legal cases.

Citgo is the seventh-largest U.S. refiner.

A court officer supervising the auction in Delaware last month recommended a $7.4-billion offer by a group led by miner Gold Reserve GRZ.V as the winner of the current bidding round, ahead of a hearing next week to decide the winner.

But the officer has continued receiving and discussing "unsolicited bids" from groups, including Elliott's affiliate Amber Energy and a unit of commodities house Vitol, that have been in the race for Citgo's parent since last year, according to filings.

A data room with key information on Citgo has remained open for bidders to consult, sources close to the negotiations said.

The improved offers are arriving amid objections to the Gold Reserve group's bid, which covers the claims of 11 creditors but does not include a provision to pay holders of a Venezuelan defaulted bond collateralized with Citgo equity.

Vitol, Amber Energy, and Gold Reserve declined to comment. A procedural conference scheduled for Wednesday was postponed so the court officer can decide how to proceed to the final sale.

In contrast with the Gold Reserve group's offer, the bids by Amber Energy and Vitol include provisions to pay the holders of PDVSA 2020 bonds, court filings showed.

But only Amber's offer, submitted last week, seems to have the support for now of at least a portion of the bondholders, a key agreement to avoid further obstacles and injunctions in the sales process, according to a letter filed on Tuesday by one of the creditors in the auction, Red Tree Investments.

"Red Tree believes that Amber Energy is the highest bidder for the PDVH shares under Delaware law and should be selected as the winning bidder," the company said in the filing.

Red Tree is affiliated with a holder of Venezuelan bonds, Contrarian Funds. Its $3.7-billion offer was selected in April as the floor bid for the current round, but the company decided not to pursue its own bid, it told the court.

Gold Reserve on Wednesday objected to Amber's bid in a filing and said the real price of its offer is $5.86 billion if the payment to the bondholders is excluded from its total value.

The offer by Vitol's unit, submitted in late June and identified in court filings as "Bidder B," includes a purchase price of $8.45 billion. But other terms, including non-cash considerations, were redacted. Court officer Robert Pincus told the court last week that the bidder had not provided proof of some key agreements, including payment to the bondholders.

The PDVSA 2020 bond VE151299784= rose 0.5 cent on Wednesday to trade at 91 cents on the dollar. It traded near par in early April.