US Judge Proposes CITGO Auction Solution

The U.S. judge overseeing an auction of shares in a Citgo Petroleum parent to pay Venezuela-linked creditors on Wednesday proposed major procedural changes to advance a case stalled by wide opposition and lawsuits by creditors in other courts.

Judge Leonard Stark recommended a series of changes to encourage higher bids in a seven-year-long court case brought by companies pursuing up to $21.3 billion in claims for debt defaults and expropriations in Venezuela.

An up to $7.3 billion bid by an affiliate of activist investor Elliott Investment Management could soon be challenged by the court's recommendation to choose a "starting point bidder" to move forward with the auction. Most parties in the case have objected to Elliott's offer, prompting the judge to develop the new terms.

Stark proposed to reopen a Citgo data room for potential bidders to prepare their offers, grant all parties in the case access to terms, offer termination protections to all possible bidders, and give enough time for competitors to raise bids.

The court said it wanted to continue with the revised sales process while some creditors' lawsuits brought in other courts continue. Several had filed in New York and Texas seeking to improve their chances of obtaining proceeds from the auction.