A court-appointed special master has named a stalking horse bidder to buy PDV Holding Inc., the indirect parent company of Citgo Petroleum Corp.— to the ire of investors in PDV.

Robert B. Pincus, a court-appointed special master, recommended that that Red Tree Investments, an indirect subsidiary of Contrarian Capital Management, should be a stalking horse bidder to buy PDV, according to an April 7 press release by Gold Reserve Ltd.

Gold Reserve, its consortium members and other parties have objected to a stalking horse bidder, saying PDV shares should be sold to the highest bidder.

The U.S. District Court in Delaware has set an April 17 hearing on the matter.

Red Tree’s bid is approximately $3.70 billion— $3.38 billion less than the $7.081 billion purchase price the Gold Reserve proposed, the consortium said.

They also stated that Red Tree’s purchase price strips value from the attached judgement creditors — creditors of the Bolivarian Republic of Venezuela and Petróleos de Venezuela S.A. (PDVSA) who have obtained a court order allowing them to participate in the sale of PDV and potentially receive proceeds from the sale, the consortium said.

Pincus and other affiliates filed their responses to the objections on April 3.

The filing stated that Pincus recommended the stalking horse bid he believes is the best starting point to encourage further bidding and “generate as much competitive tension among bidders as possible during the Topping period.”

Pincus added that the bid was “best able” to mitigate conditionality and uncertainty regarding the litigation risks associated with the PDVSA 2020 bondholder litigation, which centers on the validity of bonds issued by the Venezuelan state oil company.

ConocoPhillips is among entities participating in the sale process and said it is pleased with the most recent round of bidding and views Pincus’ decision in accordance with his obligations.

“ConocoPhillips also believes that the Special Master’s selection of the proposed stalking horse bidder resulted from considerable thought and that it was a reasonable exercise of his discretion,” the company said in a filing.

PDV and Citgo filed a motion arguing that Delaware law requires a court-ordered sale of property be at least 50% of the property’s fair market value.

“The procedures that the Special Master has employed can hardly be said thus far to have been a success. No bid submitted in the first stage of the process (i.e., before the Special Master’s “pivot” to proposed new rounds of bidding late last year) would have yielded adequate value,” the companies stated.

In September 2024, Amber Energy, backed by Elliott Investment Management, was selected to buy Citgo for a winning bid of $7.286 billion.

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The District Court in Delaware launched the sale process of PDV in October 2023 and held two bid rounds. The sale resulted in U.S. sanctions placed on Venezuela’s PDVSA.

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