HOUSTON, Aug 13 (Reuters) - An affiliate of hedge fund

Elliott Investment Management has increased its bid for the

parent firm of Venezuela-owned refiner Citgo Petroleum to a

total value of $8.82 billion, according to a court filing.

The improved bid, submitted in recent days as competition

for the refiner heats up, includes a provision to pay holders of

a key Venezuelan defaulted bond, according to a letter filed on

Tuesday by one of the creditors in the auction, Red Tree

Investments.