Judge rejects bids to block Gramercy Fund lawsuits

A U.S. court ruled on Monday that three companies can continue their lawsuits to increase their chances of receiving proceeds from an auction of Citgo Petroleum's parent shares.

In a motion to block parallel lawsuits, the court officer who oversees the auction at federal court in Delaware said that the decision could reduce any proceeds from a sale. Citgo parent PDV Holding shares are up for auction to pay $21 billion of claims by Venezuelan and PDVSA state oil company PDVSA.

PDV is an American subsidiary of PDVSA, and the sole indirect stockholder in Citgo.

Three related firms, Gramercy Distressed Opportunity Fund (G&A Strategic), Girard Street Investments and G&A Strategic brought parallel lawsuits before other courts because their claims made it unlikely that they would be able to recover all claims at the Delaware court auction.

Gramercy has declined to comment.

The court officer who was overseeing the auction asked the judge to reject their Texas and New York claims because they would reduce the bids. He recommended bids from Elliott Investment Management affiliate Amber Energy, contingent upon an injunction.

Elliott had threatened that he would quit the auction in the event the injunction wasn't issued. A spokesperson declined to comment immediately.

U.S. district judge Leonard Stark, who referred to rejecting the injunction as his "least-worst option," strongly opposed the Special Masters motion to enjoin. The special master oversees the auction.

Stark wrote that the proposed motion is without a legal foundation, and the evidence of the new bids prepared by Gramercy et al. shows the claims of Gramercy et al. "are not as serious as the Injunction Motion portrays them."

The auction of shares was "never meant" to be without risk that others could try to seize Venezuelan assets. Stark wrote that the fundamental premise of Special Master's motion, that an order is needed, was unproven.

(source: Reuters)