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Decision is 'least bad' option available, U.S. judge

writes

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Gramercy, two others free to pursue claims in separate

courts

HOUSTON, Dec 30 (Reuters) - Lawsuits by three firms

seeking to improve their chances of obtaining proceeds in an

auction of shares in Citgo Petroleum's parent can go ahead, a

U.S. judge ruled in an order issued on Monday.

The decision could reduce the proceeds of any sale, the

court officer overseeing the auction in federal court in

Delaware had said in a motion seeking to block the parallel

lawsuits. Shares in Citgo parent PDV Holding are being auctioned

to repay $21 billion in claims for debt defaults and

expropriations by Venezuela and state oil firm PDVSA.

PDV is a U.S. subsidiary of PDVSA and is the indirect sole

stockholder of Citgo.

The three related firms - Gramercy Distressed Opportunity

Fund, G&A Strategic and Girard Street Investments - brought

parallel lawsuits in other courts after their claims left them

unlikely to fully recoup claims in the Delaware court auction.

Gramercy declined to comment.

The court officer overseeing the auction had asked the judge

to bar their Texas and New York claims, saying they could reduce

bids. He had recommended bids by Elliott Investment Management

affiliate Amber Energy that were contingent on an injunction

being issued.

Elliott had threatened to quit the auction if the injunction

was not issued. A spokesperson declined immediate comment.

U.S. District Judge Leonard Stark, who called rejecting the

injunction his "least bad option," firmly opposed the Special

Master's motion to enjoin. The special master is a court officer

overseeing the auction.

The proposed motion lacks a legal basis, and evidence of new

bids being prepared show the claims by Gramercy and others "are

not nearly as big of a problem as the Injunction Motion portrays

them," Stark wrote.

The share auction was "never intended" to be free of a risk

others might try to seize Venezuela assets. "The fundamental

premise of the Special Master's Motion, that an injunction is

necessary, is unproven," Stark wrote.