Holders of Venezuelan bond secure payment pact with Elliott's affiliate, representative says

By Marianna Parraga

HOUSTON, Aug 18 (Reuters) - Holders of a defaulted Venezuelan bond have reached a preliminary settlement agreement with Amber Energy, an affiliate of Elliott Investment Management, as part of a raised bid for the parent of U.S. refiner Citgo Petroleum submitted this month, a representative of the bondholders told a U.S. court on Monday.

Improved bids, including from affiliates of commodities house Vitol and hedge fund Elliott, have recently emerged in the court-organized auction of shares in Delaware even after the officer overseeing the bidding round recommended a separate $7.4-billion offer by a unit of Toronto-listed miner Gold Reserve GRZ.V.

In a hearing on Monday, Judge Leonard Stark authorized the formal reopening of the bidding process through Friday to receive and evaluate improved offers. A new recommendation of winner or the confirmation of the Gold Reserve group's bid is expected later this month.

A payment agreement with holders of the PDVSA 2020 bond VE151299784=, which is collateralized with Citgo equity, is seen by some creditors and bidders as key to securing a winning bid, as it would remove an obstacle to finalizing the sale process.

However, other parties in the case, including representatives of Venezuela and Gold Reserve, have asked the Delaware court to wait until the validity of the bonds is decided in a separate court case in New York.

"The settlement offer is open to all 2020 bondholders," Susheel Kirpalani, a lawyer representing Amber Energy, told the court in a hearing, adding that "an excess of two thirds" of holders have adhered to the pact so far.

The Delaware court is auctioning Venezuela-owned PDV Holding to pay up to 15 creditors for debt defaults and expropriations in the South American country.

Gold Reserve has objected to the court's evaluation of last-minute bids after a recommendation was made in July, and said in the hearing the company could move to strike an alternative bid.

"We are not attempting to hold this process hostage," said Matthew Kirtland, lawyer for Gold Reserve. "We have fully committed financing that is not conditioned on the 2020 (bond) litigation... We will not walk away," he added on the offer.

The PDVSA 2020 bond, which has been rallying in the last week since Amber's bid was submitted, was trading at 94 cents on the dollar on Monday, same as on Friday and above the 92.75 cents it traded at on Thursday.