Venezuela is entering the final stage of a long legal battle in which its most valuable foreign asset, Citgo Petroleum Corp., will be auctioned off to settle claims against the government and its oil company.

The sale starts on Monday with the expected distribution of marketing materials to potential buyers, setting off a bidding process expected to last several months.

Citgo had been shielded by US sanctions against Venezuela that prevented creditors from seizing the refiner. But a US judge ordered the process for the sale of its parent company, PDV Holding Inc., to begin this month after Washington signaled it wouldn’t stand in the way.

More than 20 plaintiffs are now seeking to collect on the auction, scheduled for June 6, while navigating legal roadblocks Venezuela has thrown up. They include bondholders, commercial lenders and companies whose Venezuela assets were taken over by former President Hugo Chavez, who died in 2013.

1. Who controls Citgo and why does Venezuela have to sell it?

The Venezuelan opposition currently controls the refiner. Citgo has been trapped in a battle between two political factions since 2019, following the US government’s recognition of Juan Guaido as the country’s legitimate president. Guaido’s appointees were then authorized by the US to act as representatives of the company in US courts.

By then Venezuela’s creditors — a varied group that holds a mix of arbitration awards, unpaid loans and defaulted bonds — had begun to seek compensation in the courts, and Citgo had emerged as the most valuable asset in the mix.

The sanctions bar any transfer or sale of assets belonging to Venezuela’s state-owned energy company Petroleos de Venezuela SA, or PDVSA, which owns PDV Holding, Citgo’s parent. But the US said in May that it wouldn’t block the court-ordered sale of PDV Holding or take action against companies participating in the process. That bolstered creditor optimism.

Read More: Demand for $40 Billion Bond From Venezuela Snags Citgo Auction

The Venezuelan opposition, which includes Guaido but is splintered, has tried to settle the most pressing claims, including by Canadian mining company Crystallex International Corp., but negotiations have been overtaken by the now imminent sale of the company.

The economic backdrop of the fight over Citgo includes Venezuela’s seven-year recession and one of the longest bouts of hyperinflation in world history, which were sparked by a steep drop in oil prices and the tough US sanctions. The country’s oil exports, responsible for more than 90% of its income, collapsed amid industry mismanagement, corruption and restrictions on international trade.

Even as Venezuela’s oil industry crashed, Citgo thrived under better refining margins and as market conditions improved.

2. How do creditors line up for the sale?

Creditors seeking payment from the sale of the shares of Citgo’s parent need to take a number of steps required by US Circuit Judge Leonard Stark, who is in charge of the process leading to the sale. He has favored a first-come, first-served basis for companies to participate in the auction, and all requirements must be fulfilled by May. More than 20 plaintiffs have filed for compensation, bringing the total claims to about $20 billion.

Only Crystallex, which won a $1.2 billion award against Venezuela, has completed all the requirements, from proving that Venezuela owes it money to obtaining a writ of attachment from the court against the shares of PDV Holding. The rest of the creditors have yet to complete all the steps. Some of them have had their proceedings slowed by Venezuela’s appeal.

3. How much is Citgo worth?

The value of Citgo, the parent company’s sole asset, has increased in the past few years as crude prices soared during the pandemic and now amid high energy prices driven partly by the war in Ukraine. Experts have valued the firm from $8.1 billion to $23.5 billion. EMFI Securities estimates that Citgo is worth between $13.3 billion and $14 billion. Citgo has said it could tap its $3 billion cash pile to settle claims.

Read More: Venezuela Faces Loss of Citgo — and Desperately Needed Dollars

Under these valuations, the share sale would be enough to satisfy at least the most immediate creditors, including Crystallex. But Venezuela has about $160 billion in outstanding debt, including defaulted bonds, loans and arbitration awards.

4. Who might buy Citgo?

The purchase of Citgo could be an attractive proposition for various potential buyers.

The refiner owns three refineries and has 38 fully or jointly owned terminals, as well as a network of about 4,200 gas stations. Its assets were highly profitable last year, with each site earning between $1.6 billion and $3 billion, and are “highly competitive” in North America, with two ranking in the second 25% in 2022, said Alan Gelder, an analyst for refining markets at the consultancy Wood Mackenzie.

It could interest buyers seeking to expand their businesses or as a financial investment, according to Jorge Piedrahita, the chief executive officer of Gear Capital Partners in New York.

Companies such as Marathon Petroleum Corp. and Valero Energy Corp. would be in the first group, Piedrahita said, while private equity funds may be interested because of Citgo’s competitiveness and ability to generate cash. Independent refiners might be interested, too.

Given the sanctions, any share transfer will require a license from the US Treasury. The buyer would have to pass government scrutiny as well.

5. What’s the timeline for Citgo’s sale?

An initial schedule set in July by Special Master Robert Pincus was modified on Monday, the launch date, nearly a week after US sanctions on Venezuela were eased. Pincus changed the selling procedure from a so-called stalking horse bidder to a traditional two-round bidding process, customary for merger-and-acquisition sales “in an effort to increase competition among potential bidders.” Creditors must complete some steps to be eligible to bid by Jan. 12, and first round of bids is set for Jan. 22. The second one is to be determined. The final hearing to approve the sale is set for July 15. The new key dates reflect a less restrictive calendar compared to the one approved in July of this year.

Remaining litigation could slow the process.

Last week, the Biden administration issued a set of licenses to suspend some sanctions against Venezuela’s oil and gas sector, bonds and gold. US Treasury also extended a protection on Citgo which prevents holders of the PDVSA 2020 bonds from seizing the shares of the refiner’s parent until after January 2024. However, as the US still doesn’t recognize Maduro as Venezuela’s legitimate ruler, the company remains under the opposition’s control.

• US Justice Department officials say government wouldn’t take sanctions enforcement actions against entities participating in the sale of Citgo’s parent company
• PDVSA notes due in 2020, backed by a 50.1% stake in Citgo Holding, jump as a date for the auction of Citgo’s parent is set
• New York hedge fund Tenor Capital Management is set for a big win after investing in Crystallex
• Federal judge sets date to launch the sale process
• The US suspends sanctions on Venezuelan oil, gas and gold production and lifted some restrictions on bond trading

Author: Fabiola Zerpa, Nicolle Yapur and Jef Feeley