Gold Reserve moves to have rival Elliott bid for Citgo parent disqualified, filing says

By Marianna Parraga

HOUSTON, Aug 27 (Reuters) - Gold Reserve GRZ.V on Wednesday filed a motion to disqualify a rival bid from an affiliate of hedge fund Elliott Investment Management that a Delaware court this month selected as frontrunner in an auction for Citgo Petroleum's parent, a court document said.

A court officer overseeing the auction of PDV Holding, parent of Venezuela-owned refiner Citgo, determined this month that a $5.86 billion offer from Elliott affiliate Amber Energy was the best bid received in the competition, even though he had in July recommended a $7.4 billion bid from a group led by Gold Reserve subsidiary Dalinar Energy.

The officer must now submit a new recommendation on Friday, which will be evaluated by Judge Leonard Stark next month.

The determination that Amber's bid price was superior "is contrary to this court's orders, discards the bidding procedures on which Gold Reserve and other parties relied, and threatens to short-change the attached judgment creditors by $1.5 billion relative to the Dalinar Energy's $7.382 billion bid," Gold Reserve said in the motion to strike.

Canadian-listed Gold Reserve is a company focused primarily on managing and monetizing a collection of legal and arbitral claims after its mining assets were expropriated in Venezuela. It has participated in the court case as a bidder and creditor.

Another creditor in the auction, Siemens Energy SIEGn.DE, joined Gold Reserve's motion to disqualify Amber's bid, a separate court filing showed on Wednesday.

As part of its bid, Amber is offering a settlement with holders of a defaulted Venezuelan bond that would free a $2.86 billion claim.

In August, after some aspects of Amber's bid first emerged, Gold Reserve's lawyers told the court that the company would move to invalidate it, arguing it failed to comply with some bidding terms.

In a court-organized auction, a motion to strike is a request to invalidate or remove a bid to challenge a specific aspect of the sale process, not the entire auction itself.

The complex auction being carried out to repay 15 creditors for debt defaults and expropriations by Venezuela and its state oil company PDVSA was relaunched in January. A year-long bidding process last year, which also included a bid from Amber, ended in shambles due to objections from creditors.