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Vitol's subsidiary rushing to secure deal with bondholders

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Some creditors unwilling to accept non-cash offers

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Final hearing in Delaware set for August 18

By Marianna Parraga

HOUSTON, Aug 11 (Reuters) - Subsidiaries of miner Gold

Reserve ( GDRZF ) and commodities trader Vitol are

nearing the finish line in a fiercely contested court-organized

auction that will determine control of Venezuela-owned refiner

Citgo Petroleum, according to two sources with knowledge of the

process and court filings.

A court officer overseeing the bidding round last month

recommended a $7.4-billion offer by a group led by a unit of

Bermuda-based Gold Reserve ( GDRZF ) as the auction's winner, out

of a total of five bids submitted, including one by a Vitol

subsidiary. Delaware Judge Leonard Stark is expected to choose

the winner after a final sale hearing on August 18.

The decision will determine control of the crown jewel of

Venezuela's overseas assets, the seventh-largest U.S. refinery.

Despite Gold Reserve's ( GDRZF ) leadership status, its bid faces

objections from various parties in the case and holders of a

Venezuelan bond, some of whom the Vitol unit is seeking to

strike a deal with, in a move that could shake up the auction

again.

Following his recommendation, court officer Robert Pincus

last week told the court that a competing bid by a company he

did not identify was on the table, but it had not so far met the

criteria to be considered superior to the Gold Reserve ( GDRZF ) group's

offer. The bid he was referring to was made by the Vitol

subsidiary, according to the sources, who spoke on the condition

of anonymity because they were not authorized to speak publicly.

His disclosure was the latest twist in a complex court

process, initiated by miner Crystallex against Venezuela in

2017. Over a dozen additional companies hit by defaults in

Venezuela or whose assets were expropriated by the state are

pursuing proceeds from the auction.

Gold Reserve ( GDRZF ) on Monday asked the court to proceed to the final

sale hearing as scheduled and warned that any competing offer,

including a non-cash consideration, would be rejected by the

company, which is also a creditor in the case trying to recover

$1.18 billion from the expropriation of its assets.

Vitol and Gold Reserve ( GDRZF ) declined to comment.

HOT COMPETITION

Gold Reserve's ( GDRZF ) frontrunner status in the auction of Citgo's

parent PDV Holding could be threatened if the Vitol unit

succeeds in securing a payment agreement with holders of the

PDVSA 2020 bond, collateralized with Citgo equity, sources close

to the talks said.

Vitol's push follows objections by bidders and creditors,

ranging from mining and oil companies whose Venezuelan assets

were expropriated to holders of defaulted notes, which have

flooded the court in recent weeks opposing some terms of the bid

by Gold Reserve's ( GDRZF ) subsidiary Dalinar Energy, especially its lack

of an agreement to pay the bondholders.

The Vitol subsidiary's improved offer includes a purchase price

of $8.45 billion for the PDV Holding shares and intends to make

a separate payment to the bondholders, according to its bid,

submitted to the court with the bidder's name redacted.

The $8.45 billion it is offering would cover the claims of

13 of a total of 15 creditors registered to claim proceeds,

versus the 11 creditors expected to be covered by the Gold

Reserve ( GDRZF ) group's bid. But because the Vitol subsidiary's bid was

not entirely disclosed, it remains unclear if it includes

non-cash considerations.

"We intend to finance the transaction entirely with cash on

hand and existing or new intracompany credit facilities," the

company told the court in its offer.

The Vitol subsidiary also told the court that it was in

discussions with the 2020 bondholders. Pincus last week

confirmed that talks with various parties were ongoing, but at

the time of his submission on Thursday, no documentation of any

such agreements had been received.

Pincus did not say if a deadline had been set for the Vitol

unit to provide the required agreements, but the clock is

ticking for the judge to stick to his proposed calendar without

additional delays.

A procedural hearing is scheduled for August 13, and a final

hearing marked as the last step before a decision by Judge Stark

on the winner remains set for August 18.