Elliot's holdback for PDVSA 2020 bondholdersOne of the most astounding features of Elliot's bid is the holdback ($2.6 billion or so) for the benefit of the PDVSA 2020 bond holders.
So it's a $7.3 billion bid BUT roughly $2.6 billion would be held back pending a final court decision on the PDVSA 2020 bonds--which MIGHT end up being worth around $2.6 billion and MIGHT end up worth zero.
And that final word from the US courts could (likely will) take years.
Not only would this leave Gold Reserve out in the cold, it would be essentially fatal for Rusoro--which is currently low on cash.
The holdback is offensive to the entire process. Pretty much all purchased big companies have various contingent liabilities that will each have their own level of risk attached to them. Buyers make their own determinations as to the risks and then price their bids accordingly.
And the 2020 bond holders currently face their own risk (beyond the huge risk that they'll lose in court and get the nothing that they deserve). They face the risk that by the time they win in court (IF they win) Citgo will have somehow dropped in value such that it cannot pay the full $2.6 billion and the collateral (50.1% of Citgo shares) is worth less than $2.6 billion. Could be bad management or maybe oil prices drop to $5 per barrel.
The Elliot holdback would fully protect those bondholders from that risk--and thus be a huge gift to them--at the expense of legitimate creditors Rusoro and Gold Reserve (possibly other creditors also).
The Special Master, in approving this, is sort of acting like a corporate board of directors that sells short its own shareholders in order to give a repayment guarantee to one big (potential) liability holder that happens to be their brother-in-law.
I will be surprised, to say the least, if Judge Stark goes along with this. It would go against the spirit of evrything that has been happening in this case--for years.
I suggested yesterday the SM should be fired for this. Looks to me like he should also be disbarred.