*

Court officer defends recommendation of Amber's bid

*

Venezuela, Gold Reserve ( GDRZF ) say risk linked to bondholders'

claim is

not worth $2 billion

*

Delaware judge expected to select a winner after court

hearing

(Rewrites paragraph 1, adds details throughout and counsel's

opinion in paragraphs 5-6)

By Marianna Parraga

HOUSTON, Oct 21 (Reuters) -

Bidders pursuing the parent of Venezuela-owned U.S. refiner

Citgo Petroleum

and creditors waiting to cash proceeds from the

court-ordered auction clashed in Delaware on Tuesday over which

offer should be ultimately approved after two years of rounds.

The court is trying to complete the auction to compensate up

to 15 creditors for debt defaults and expropriations in

Venezuela. Citgo's parent PDV Holding was found liable for the

South American country's debt as part of the eight-year case.

Lawyers representing Citgo and Venezuela asked the court in

a hearing to reject a $5.9 billion bid from an affiliate of

Elliott Investment Management due to its "low price," which was

below a rival offer from a subsidiary of Gold Reserve ( GDRZF ) , and

said the sale process was "defective."

The bid from Elliott's affiliate Amber Energy was

recommended in August by an officer overseeing the auction, a

switch from his previous support to Gold Reserve's ( GDRZF ) offer.

A counsel for court officer Robert Pincus defended the

process and said the court conducted "the broadest marketing

process of any asset ever."

He also said Amber's bid implies a business value of

about $9.5 billion and provides the best combination of price

and likelihood of transaction completion.

Amber's offer includes a separate pact to pay $2.1 billion

to holders of a defaulted Venezuelan bond. Because the agreement

is only valid through early December, counsels for Amber and

Pincus have pressed the court to soon select a winner.

Delaware Judge Leonard Stark this week heard arguments about

motions filed by Venezuela and Gold Reserve ( GDRZF ) to disqualify him,

court officer Pincus and two advising firms over alleged

conflict of interest.

Final arguments over the bids were also presented to

court.

Amber's bid "is so low ... that it shocks the conscience of

this court and can't be confirmed," Nathan Eimer, counsel for

Citgo and PDV Holding, said during the hearing.

Gold Reserve ( GDRZF ) also asked the court to reject Amber's bid and

approve the offer submitted by its subsidiary instead, which is

about $2 billion higher in price but does not include an

agreement to pay the Venezuela bondholders.

CREDITORS VS BONDHOLDERS

Gold Reserve's ( GDRZF ) bid intends to distribute auction proceeds

among a larger number of creditors in Delaware, instead of

settling the bondholders' claim, which is pending a final

resolution over the notes' validity in a separate New York case.

"It would be a fundamental injustice in the event a

substantial amount of value was diverted from the attached

judgment creditors here to the 2020 bondholders on the basis of

a security, a pledge instrument that might be deemed invalid,"

said Matthew Kirtland, counsel for Gold Reserve ( GDRZF ).

Since the U.S. imposed sanctions on Venezuela in 2019, Citgo

severed ties with its ultimate parent, Caracas-headquartered oil

company PDVSA, and is now controlled by boards appointed by an

opposition-led congress.

Both President Nicolas Maduro's government and the political

opposition reject the auction. The U.S. Treasury Department,

which has shielded Citgo from creditors in recent years, must

approve the auction's winner.