Trading firm Vitol enters bidding race in Citgo auction, Red Tree selected as stalking horse

Vitol, a prominent trading firm, has entered the bidding race to acquire US refiner Citgo and filed a request with a federal court seeking further details on the stalking horse bid, Argus Media reported. 

The company’s filing on March 24 to the US District Court for the District of Delaware identifies it as a "competing bidder" in the auction process.

The auction’s court-appointed official had selected a $3.7bn bid from Contrarian Capital Management as the stalking horse through its subsidiary Red Tree Investments, setting a price floor for the sale. It thus emerged as the preferred bidder for the sale of shares in the Venezuelan-owned refiner.

The official's decision was influenced by the likelihood of regulatory approval, Contrarian's financial capabilities, and assurances of funding. 

However, Gold Reserve, another bidder, is protesting about the choice, questioning why its $7.08bn offer was not considered and asking the court to disclose more details about the Contrarian bid, including a transaction support agreement involving bondholders of Citgo’s parent company, Venezuelan state-owned PDV.

Vitol has aligned itself with Gold Reserve's request, voicing concerns about the sealed and heavily redacted documents in the process. 

The company argues that access to additional information is crucial to refining its bid during the topping period. Court filings show that four bids were submitted in total this month, with Contrarian’s bid ranking second.

The auction of Citgo, which includes its three refineries, lubricant plants, midstream, and retail assets, is part of efforts to settle debts owed by PDV, which is based in Texas but owned by Venezuela’s PDVSA. 

Last year Amber Energy, a unit of Elliott Investment Management, emerged as the highest bidder with a $7.3bn offer, but the recommendation did not garner public support from involved parties, leading the court officer to restart the bidding process.

According to a document obtained by Reuters, the court received four potential 'stalking horse' offers for Citgo Petroleum shares before the deadline of March 7, 2025. 

The judicial expert overseeing the auction recommended Red Tree’s proposal, citing its strong valuation and lower conditionality compared with competing bids. Now, Judge Stark must decide whether to accept or reject the recommendation before the auction process moves forward. 

The court filing noted that Red Tree’s bid was the second highest but was considered the best option due to its combination of value and transaction certainty. "Red Tree's proposed transaction has the second highest purchase price, and the special master believes it has the least conditionality," said court documents.

"The special master considers that the combination of value and the certainty of the proposed transaction results in its being the best available stalking horse," the filing said. 

"This offer would resolve the dispute with the holders of PDVSA's 2020 bonds while raising $1.5bn to pay other creditors," Jose Ignacio Hernandez from consultancy Aurora Macro Strategies told Reuters.

"For Red Tree, it's a financial, not an operational deal. But Venezuela could object it, saying it's too low," he continued.

Red Tree Investments, along with another Contrarian Funds subsidiary, holds defaulted Venezuelan bonds and is among 18 creditors seeking repayment from Venezuela.

The federal court in Delaware is auctioning shares in US-based Citgo's parent PDV Holding to cover up to $21.3bn for 18 creditors who are seeking to be compensated for Citgo-related debt defaults and, in Venezuela, expropriations. 

Together, these firms are pursuing approximately $680mn in outstanding debt, including interest and fees, according to court records.