• Gold Reserve's bid covers 11 creditors, does not include a pact to pay bondholders
• Five offers received in 'topping' period, some did not qualify
• US Treasury must approve auction winner

July 3 (Reuters) - A $7.38 billion bid by a unit of Toronto-listed miner Gold Reserve (GRZ.V) , opens new tab was named preliminary winner of an auction of shares in the parent of Venezuela-owned refiner Citgo Petroleum, organized by a U.S. court to pay creditors for debt defaults and expropriations in the South American country.

If the offer is approved, proceeds from the auction of PDV Holding would be enough to compensate 11 of the 15 creditors fighting in U.S. courts since 2017 to recover billions of dollars after Venezuela's wave of nationalizations, an officer overseeing the auction said in one of the filings.

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Bermuda-based Gold Reserve expects to have its own $1.18 billion claim compensated from the proceeds, following the expropriation of its mining assets in Venezuela. The bid made by its subsidiary Dalinar Energy Corporation will now be evaluated by Delaware Judge Leonard Stark before a final decision.

Dalinar was created by Gold Reserve to participate in the bidding round and take control of Citgo, the crown jewel of Venezuela's overseas assets and the seventh largest U.S. refiner with an 807,000 barrels-per-day network.

Even though the cash component of the Gold Reserve-led group's bid seems lower than rival offers, it covers a substantial number of creditors including oil producer ConocoPhillips (COP.N) , opens new tab, miners Rusoro (RML.V) , opens new tab and Crystallex and conglomerates Koch, OI Glass (OI.N) , opens new tab and Siemens Energy (ENR1n.DE) , opens new tab.

"This is a victory for the claimants," Gold Reserve CEO Paul Rivett told Reuters in a phone interview.

Dalinar's bid exceeded a $3.7 billion offer by Contrarian Funds' Red Tree Investments, selected in March as starting bid.

"Dalinar's proposed sale transaction is approximately $3.576 billion higher than the stalking horse transaction and is the highest bid that meets the bid requirements," court officer Robert Pincus, who oversees the auction, said in the filing.

The bid relies on a combination of equity and debt financing, and is supported by Rusoro, Koch and Siemens. It includes financing from JP Morgan Chase Bank, the Toronto-Dominion Bank (TD.TO) , opens new tab and Sumitomo Mitsui Banking Corp, according to the filings.

A final hearing on the sale process' results has been scheduled for August 18 once creditors complete research and file any objections. With Venezuela under U.S. sanctions, the U.S. Treasury Department must also green-light the winner.

Dalinar is expected to soon submit an application requiring guidance from the Treasury, according to court procedures. However, the department in April declined to disclose its next moves after extending its protection over Citgo until December, Pincus told the court in a briefing call last month.

BONDHOLDERS CHASING

Contrary to rivals, Dalinar's offer did not include an agreement to pay holders of a key defaulted Venezuelan bond collateralized with Citgo equity, which implies "a degree of risk," Pincus said.

The lack of a plan to immediately settle that claim, which is pending a final decision in a separate case in New York, could delay the distribution of auction proceeds, analysts and sources from other bidding companies said.

Parties representing the bondholders, which previously told the court they could file an injunction, declined to comment. A key hearing on its New York case will take place next week.

"In this bidding, there was an obvious fight between cash and certainty of closure, and guidance provided by the court was contradictory," one of the sources said.

In a case first introduced by Crystallex against Venezuela, PDV Holding was found liable for the country's debt. The Delaware court has since then attempted to secure a deal to satisfy up to $19 billion in claims.

Houston-based refiner Citgo Petroleum severed ties with ultimate parent PDVSA in 2019 following U.S. sanctions. An opposition-led Congress that year appointed a new board of directors for the refiner, which is now overseen by opposition-controlled supervising boards.

Venezuelan President Nicolas Maduro's government has called the auction a robbery of sovereign property.

SPICED-UP COMPETITION

New bidders emerged in the last mile of the auction, following court decisions in parallel legal cases that encouraged new and improved offers.

A group led by commodities house Vitol made a last-minute bid exceeding $10 billion, while a consortium led by private equity firm Black Lion Capital Advisors submitted an all-cash $8 billion bid, according to court filings and sources.

But several bids failed to meet the auction's requirements, according to Pincus' filings.

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

https://www.reuters.com/business/energy/us-court-officer-recommends-dalinars-738-billion-bid-citgo-parent-2025-07-03/