UPDATE 3-Gold Reserve makes 'stalking horse' bid for shares in Citgo's parent

Adds background in graph 6, changes name to Koch fro Koch industries in graph 7

By Seher Dareen and Marianna Parraga

March 10 (Reuters) - Canadian miner Gold Reserve GRZ.V said on Monday that a subsidiary has submitted an offer that could be selected as the starting bid in a court-organised auction of shares in Venezuela-owned PDV Holding, the parent of Citgo Petroleum.

Most creditors in an auction last year rejected a $7.3 billion offer for PDV Holding by an affiliate of hedge fund Elliott Investment Management, due to conditions included.

A court officer overseeing the process in a Delaware court later changed the auction mechanism to begin with a "stalking horse bid," restarting bidding this year. It is unclear if the court has received other starting offers.

The U.S. District Court in Delaware is auctioning shares in PDV Holding to repay $21.3 billion in claims against Venezuela and state-oil firm PDVSA, which owns PDV, for expropriations and debt defaults.

Houston-based Citgo is the crown jewel of Venezuela's overseas assets. Venezuela's President Nicolas Maduro has called the auction a "robbery" of Venezuela's assets in the United States. His government has criticized U.S. sanctions on the country, in force since 2019.

Since 2019, Citgo and its affiliated companies have been controlled by supervising boards that were appointed by Venezuela's opposition-led National Assembly. The U.S. Treasury Department, which last year extended its protection over Citgo for three more months, must give its green light to the auction's winner.

The court could pick the initial offer by a consortium led by Gold Reserve's subsidiary Dalinar Energy Corporation, which also includes two units of U.S. conglomerate Koch, setting the starting point or the minimally accepted offer.

A topping-off period would follow for the court to receive rival bids, with a final hearing on the sale set for July, according to the court's schedule.

Gold Reserve said the terms of the bid would remain confidential until all offers have been reviewed, but did say that Dalinar Energy's bid relies on a combination of equity and debt financing.

If accepted, the offer would satisfy "a substantial percentage of Gold Reserve's attached judgment," estimated in about $1 billion plus interests. It also includes a mechanism whereby creditors junior to Gold Reserve would have the option to participate by receiving warrants in Gold Reserve in exchange for contributing a portion of their attached judgements to the bid.

Citgo has been the target of creditors seeking compensation for late Venezuelan President Hugo Chavez' nationalization wave and President Nicolas Maduro's failed debt payments.

In a court case first introduced in 2017, the Delaware court found Citgo liable for Venezuela’s defaults and expropriations.

A total of 18 creditors holding arbitration rulings and court cases against Venezuela and PDVSA totalling $21.3 billion are pursuing proceeds from the auction of shares that was launched in October 2023, but a first bidding round last year failed to meet the creditors' expectations.

(Reporting by Seher Dareen in Bengaluru and Marianna Parraga in Houston; Editing by Shinjini Ganguli and Susan Fenton)

((Seher.Dareen@thomsonreuters.com; If in India call +91 74832 70128;))