HOUSTON (Reuters) -A U.S. judge on Tuesday approved a $5.9 billion bid from an affiliate of Elliott Investment Management in the court-organized auction of Citgo Petroleum's parent, clearing the way to order the sale of Venezuela-owned PDV Holding.

Judge Leonard Stark, from Delaware, overruled pending objections to the bid and set a Friday deadline for a report with any other material issues that could have been overlooked. He asked a court officer overseeing the process to submit a proposed sale order in sufficient time to be signed by Monday, for which parties including Venezuela must reach an agreement on terms.

"The Amber Bid offers the best overall combination of price and certainty of closing of any bid submitted," Stark wrote, characterizing the process as fair and equitable. 

The decision confirms a shift from a recommendation made in August by court officer Robert Pincus, following a bidding war in the competition's last mile that saw new and improved offers for control of Citgo, the seventh-largest U.S. refiner.

The main attraction of the bid from Elliott's Amber Energy is that it offers a $2.1 billion payment to the holders of a defaulted Venezuelan bond collateralized with Citgo equity, which is expected to remove a key obstacle to taking ownership of Citgo's assets.

"We look forward to working with the talented Citgo team to strengthen the business through capital investment and operational excellence," Amber Energy CEO Gregory Goff, who plans to assume the top role at the refiner, said on Tuesday in a statement. 

The company will continue to operate as Citgo, and Amber said it's planning operational enhancements and strategic investments to improve profitability.

Later on Tuesday, Toronto-listed miner Gold Reserve , which had requested a stay in the Citgo parent auction in October, said it disagreed with the court's decision.

The company said its previously recommended bid should have been selected for the reasons stated in its multiple objections.

The miner also said that the sale process "was plagued with significant conflicts of interest, including the $170 million in fees collected by the special master's advisors from affiliates of Elliott and the 2020 bondholders involved in Elliott's bid."

Gold Reserve said it would evaluate and pursue all available remedies for relief to protect its rights.

CREDITORS' EIGHT-YEAR LEGAL BATTLE

A total of 15 creditors have been fighting in an eight-year case to recover nearly $19 billion in U.S. courts after Venezuela expropriated assets and defaulted on debt. Evercore, a firm advising the court, valued Citgo at about $13 billion as part of the auction, but Venezuela has argued it is worth more than $18 billion.

Stark previously denied motions by the Venezuelan parties and Gold Reserve to disqualify him, the court officer overseeing the process and two firms advising the court over an alleged conflict of interest.

Amber Energy said it expects the sale to close in 2026, although the transaction still needs approval from the Office of Foreign Assets Control and other regulators. It was not immediately clear if a deadline was set for receiving replies from those authorities.

"If OFAC grants a license to Amber Energy, and if this Court's judgment is not reversed on appeal, many of the judgment-creditors who have spent years and millions of dollars trying to recover on billions of dollars of judgments, to compensate them for harm inflicted by one or more of the Venezuela Parties years or decades ago, will finally obtain relief," Stark wrote.

Gold Reserve and creditors Siemens Energy, Consorcio Andino, Valores Mundiales, Gramercy Distressed Opportunity Fund and G&A Strategic Investments tried to disqualify Amber's bid, saying that Pincus' determination that its price was superior discarded the bidding procedures. Their motion was denied in September.

 The selection of Amber Energy's offer means those creditors will recover hardly anything from the claims they won against Venezuela for debt defaults and asset expropriations, according to a priority list set by the court for distributing the auction proceeds. But large creditors including ConocoPhillips and miners Crystallex and Rusoro are set to recover billions from proceeds.

HOW MINER'S LAWSUIT LED TO SALE

In a case first introduced by miner Crystallex in 2017 against Venezuela, Citgo's parent PDV Holding was found liable for the country's debt. The Delaware court has since attempted to secure a deal to satisfy the creditors.

In a spiced-up competition, some bidders focused on maximizing proceeds for the 15 creditors in Delaware, while others preferred to reduce litigation by negotiating a payment to the PDVSA bondholders.

A New York judge in September confirmed the validity of the defaulted bonds, supporting the holders' claim and boosting Amber's bid. Lawyers representing Venezuela immediately filed an appeal.    

Amber Energy won a first bidding round last year, but its conditional $7.3 billion offer was rejected by most creditors, creating the need for new rounds this year and a fresh set of rules to encourage competition in the complex auction.

Houston-based refiner Citgo Petroleum, the crown jewel of Venezuela's overseas assets, severed ties with PDVSA in 2019 following U.S. sanctions. Both Venezuelan President Nicolas Maduro's government and his political opposition have rejected the auction.