*

Lack of agreement to pay bondholders, confusing evaluation

criteria worry some participants

*

First bidding round last year failed to please creditors

*

If approved, Gold Reserve ( GDRZF ) group's bid would cover 11

creditors

(New throughout, adds confirmation that objections filed, adds

comments from judge and from Gold Reserve ( GDRZF ) group)

By Marianna Parraga

HOUSTON, July 7 (Reuters) - Holders of a defaulted

Venezuelan bond, some creditors and bidders that participated in

a U.S. auction of shares in the parent of Venezuela-owned

refiner Citgo Petroleum filed objections to the auction's

recommended outcome, court documents released on Monday showed.

The challenge to the $7.4 billion offer by a group led by a

unit of miner Gold Reserve ( GDRZF ) could again derail the sale.

Citgo, Venezuela's priced foreign asset, has been put on the

auction block to pay creditors who lost billions to the South

American country's expropriations and defaults.

Proceeds from the court-organized auction of PDV Holding are

expected to compensate up to 15 creditors fighting since 2017 to

recover nearly $19 billion in U.S. courts.

The latest bidding round was the second organized to auction

the parent of Houston-based Citgo Petroleum after a failed round

last year. Last week, a court officer overseeing it recommended

an offer by Gold Reserve's ( GDRZF ) subsidiary Dalinar Energy Corporation

to Delaware Judge Leonard Stark.

If approved, the Gold Reserve ( GDRZF ) group's bid would cover 11 of

the creditors, including its own $1.18 billion claim for the

expropriation of mining assets in Venezuela.

Contrary to other bids, Dalinar's offer did not include an

agreement to pay holders of a key defaulted Venezuelan bond

collateralized with Citgo equity, which has triggered most of

the objections.

A lack of clarity about the evaluation criteria also created

confusion about the bidding round's goal, the objections filed

showed.

Gold Reserve ( GDRZF ) and lawyers representing the holders did not

immediately reply to requests for comment.

BONDHOLDERS IN OR OUT?

Some participants view a pact with the bondholders as

essential to clear the way for a transfer of the shares to the

winning consortium. Others say the holders first need to win in

a New York court, where they are fighting since 2019 to have

their claim enforced.

In a briefing call in late June, Judge Stark told a counsel

of court officer Robert Pincus that he was "highly confident"

there was going to be further litigation in the case after the

bid recommendation, according to a transcript of the call.

Pincus oversees the auction as "special master."

Stark will receive objections to the recommended bid through

July 9. Any competing bidder can also disclose its offer's terms

to challenge the winner. A final hearing on the sales process is

scheduled for August 18.

In parallel, Judge Katherine Polk Failla from the Southern

District of New York will hold a hearing on July 10 where the

bondholders will seek relief, including through an injunction,

to preserve their claim, they said.

The Gold Reserve ( GDRZF ) group's proposed transaction "appears

designed to interfere with the 2020 bondholders' ability to

protect their rights," the bondholders told Stark in a filing on

Monday.

"The special master conducted a deficient process in

which he failed to generate highest and best bids by instead

encouraging bids that contemplate transactions that have no

meaningful prospect of closing," they added.

Another creditor in the Delaware auction, U.S. oil

producer ConocoPhillips ( COP ), told the court it would have

insufficient options to select another bidder if the bondholders

block Gold Reserve's ( GDRZF ) transaction. ConocoPhillips ( COP ) said this

"could render the financing structure for the Gold Reserve ( GDRZF ) bid

impossible or impracticable."

A $7.3 billion offer by an affiliate of hedge fund Elliott

Investment Management was rejected last year by most creditors,

creating the need for a new bidding round this year.