U.S. Judge Approves $3.7B Red Tree Bid for Citgo Parent Auction

A U.S. federal judge has approved a $3.7 billion bid by Red Tree Investments, an affiliate of Contrarian Funds, as the lead offer in the auction of shares in the parent company of Citgo Petroleum, a U.S.-based refinery owned by Venezuela’s PDVSA. The auction aims to satisfy billions in claims from creditors and bondholders stemming from expropriated Venezuelan assets.

The ruling by U.S. District Judge Leonard Stark came despite opposition from 16 creditors, including Gold Reserve, a mining consortium that proposed a rival $7.1 billion bid. While some creditors favored Red Tree’s offer for its agreement with holders of PDVSA’s 2020 bonds—secured by Citgo stock—others argued it undervalued the asset.

Judge Stark concluded that Red Tree’s proposal offered the best combination of price and certainty, encouraging stronger bids. He directed court officer Robert Pincus to set a timeline for topping the initial bid and to prioritize higher price offers in future recommendations.

The upcoming auction’s final hearing is slated for July, with Citgo’s valuation estimated between $11 billion and $13 billion. However, final bids are expected to stay under $8 billion. Red Tree’s bid is likely to trigger offers that could channel up to $3 billion to 2020 bondholders, reducing the pool available to other creditors such as foreign oil firms and industrial companies impacted by Venezuela’s nationalizations.

In a previous auction round, a $7.3 billion bid from an Elliott Management affiliate was rejected due to unfavorable conditions. The current auction process is expected to reshape the creditor landscape tied to Citgo, one of Venezuela’s most valuable foreign-held assets.