Citgo parent auction nears final stages as sale hearing kicks off

By Marianna Parraga

HOUSTON, Sept 15 (Reuters) - A long-awaited sale hearing expected to complete a U.S. court-organized auction of shares in the parent of Venezuela-owned U.S. refiner Citgo Petroleum kicked off on Monday, with bidders and creditors locked in a bitter dispute over who should win.

The Delaware court is hearing testimony from involved parties, witnesses and experts in the four-day showdown before Judge Leonard Stark selects a final winner.

At stake is the future of the seventh largest U.S. refiner, whose parent was found liable for the South American nation's debt, as 15 companies with expropriated assets and holders of defaulted bonds pursue its assets.

Judge Stark on Monday denied a motion to extend the hearing to consider a last-minute bid from Blue Water BLUW.O, and also denied Venezuela's request to suspend the proceeding over an alleged conflict of interest involving law firm Weil, Gotshal & Manges, which is advising the court. Another set of arguments could be presented in October if the court decides more time and evidence are needed.

"This sale hearing represents a significant milestone in an 18-year litigation effort that ConocoPhillips COP.N has been engaged in since its assets were expropriated in 2007 by (Venezuelan) President Hugo Chavez," Amy Wolf, a lawyer representing the oil company, the largest creditor in the case with more than $11 billion in claims, said during the hearing.

Blue Water representatives told Reuters the firm was granted access to Citgo's data room and expects the court to allow it to present supporting evidence at the end of the hearing. Weil, Gotshal & Manges did not immediately reply to a request for comment.

RIVAL BIDS FOR CITGO CLASH IN COURT

In July, a court officer overseeing the process selected a subsidiary of Toronto-listed miner Gold Reserve GRZ.V as the auction's frontrunner.

But following a last-minute bidding war, officer Robert Pincus last month switched his recommendation to a $5.9 billion bid from Amber Energy, an affiliate of hedge fund Elliott Investment Management.

The decision has unleashed objections and a motion to disqualify Amber's bid, which remains pending, amid a battle between expropriated companies and holders of the nation's defaulted bonds.

Miner Crystallex, ConocoPhillips COP.N and an affiliate of bondholder Contrarian Funds told the court on Monday they support Amber's bid, while Venezuela, Gold Reserve and junior creditors objected to it.

The hearing "will serve as the first stress test of whether the Amber bid can survive the full gauntlet of procedural, legal, and geopolitical risks," said lawyer Jose Ignacio Hernandez from consultancy Aurora Macro Strategies, in a report last week.

By including a $2.1 billion cash payment to holders of PDVSA's 2020 bonds, Amber's bid creates an opportunity to resolve a long-pending claim that is being heard in a separate New York court.

However, Venezuela and a handful of creditors prefer to wait for the resolution of the New York case, where the validity of the bonds is in dispute, before anything is paid to the holders.

The court on Monday heard testimonies from experts about Citgo's valuation, following Venezuela's arguments that the assets should not be auctioned at a fraction of their value.

The company was valued at some $13 billion by court advisors before the first bidding round last year, but a more recent valuation raised it to some $18 billion, one of the experts said. Bids have not surpassed $11 billion.