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Creditor Banks Sell Yukos Loan to Rosneft

March 16, 2006 Moscow Times
Rosneft's headquarters across the river from the Kremlin. The state oil giant acquired $482 million of Yukos' debts.

Rosneft has bought the remains of a $1 billion loan owed by Yukos from a syndicate of Western banks, Yukos said Wednesday, a move that puts the state-owned oil giant in the driving seat for a bankruptcy suit filed by the banks last week.

"It appears, from information secured today by Yukos Oil Company, that the agreement between the banks and Rosneft was undertaken on 13 December 2005," Yukos said in an e-mailed statement. The company is "taking counsel as to how these new circumstances may affect the bankruptcy proceedings," the statement said.

The syndicate of 15 banks led by France's Societe Generale filed a petition Friday in the Moscow Arbitration Court for Yukos to be declared bankrupt on $482 million outstanding on the $1 billion loan, opening the way for the state to swallow up the rest of the embattled oil major. Rosneft has already been poised to take over Yukos after acquiring its main production unit, Yuganskneftegaz, following a controversial auction over nearly $30 billion in back taxes in December 2004.

News of the deal appears to leave Yukos, already rocked by a management power struggle, in an even greater legal tangle just as it said it was on the verge of selling its 53.7 percent stake in Mazeikiu Nafta refinery in Lithuania. The deal, estimated to be worth up to $1 billion, would have settled debts to the creditors and possibly stave off the bankruptcy suit. The Moscow Arbitration Court has set a March 28 start date for bankruptcy hearings.

Through its ownership of Yugansk, Rosneft already held the guarantee for the $1 billion loan and in recent published accounts said it had reached agreement with the banks over the guarantee, an early indication it could have engineered the suit. "The government through Rosneft has maintained very tight control of the entire process of taking over Yukos," said Steven Dashevsky, head of research at Aton brokerage.

No one at Rosneft was available to comment when the news came late Wednesday. Societe Generale has declined to comment on the suit.

The apparent debt buyout could put Rosneft in a position to take over Yukos' foreign assets, including its Mazeikiu refinery.

"Rosneft is using the cover of the Kremlin to try and seize the maximum amount of assets," said Yukos' former first vice president, Alexander Temerko. "If there is no announcement on the winner of Mazeikiu, it can file to freeze [the refinery]."

"It's trying to win control of the only asset that was out of its reach," he said. "The only way to save Yukos is to announce the winner of the tender."

Now that Rosneft owns the debt, Yukos said it was not clear whether Rosneft would be able to take over the SocGen claim on the proceeds from the sale of Yukos' foreign assets.

Under a Dutch court ruling last year, the proceeds from the sale of Mazeikiu and other foreign assets held by Yukos International were to go directly to the Societe Generale syndicate and also to a firm representing the interests of Menatep, Yukos' main shareholder. Yukos owes Menatep $660 million outstanding on a separate $1.6 billion loan.

"There is the potential that Rosneft could step into the banks' shoes. But we're still seeking clarity on that," said Yukos spokeswoman Claire Davidson, referring to SocGen's claims on Mazeikiu.

Yukos is speeding ahead with negotiations with the Lithuanian government over the sale of Mazeikiu. As the bankruptcy suit was filed Friday, Yukos received a last minute offer from the Lithuanian government to buy the refinery. Lithuanian daily Lietuvos rytas said Wednesday the government had offered $1.4 billion.

Lithuanian Economy Minister Kestutis Dauksys declined Wednesday to disclose how much the government offered but said it expected a response from Yukos next week.

Yukos said Wednesday it expected to make an announcement on the sale in the very near future. "We are very encouraged by the progress being made. I imagine we'll be able to come out with a more clear statement in the very, very near future," Davidson said.

But it was not clear whether any sale of the refinery could invalidate the bankruptcy suit by using the proceeds to pay off claims, Davidson said.

Yukos has been seeking a buyer for the refinery, but attempts to clinch a sale so far have been repeatedly blocked by the Kremlin, while Rosneft has been eyeing the asset, too, Temerko has said.

Rosneft is also suing Yukos for $2.2 billion it claims went missing through transfer-pricing schemes from Yugansk. Yukos' total liabilities to Rosneft, including the $482 million, now stand at nearly $3 billion, potentially equaling the value of the 23 percent stake Yukos still owns in Yugansk.

Yukos' ownership of a stake in Yugansk could create complications for a planned IPO of Rosneft later this year. Seizing the stake via bankruptcy proceedings could help clear the way.

Shares in Yukos had tumbled more than 40 percent on Monday on news of the bankruptcy proceedings. On Thursday, the shares won back 32 percent of their value on news of the debt transfer to close at 36.6 rubles.

The syndicate of banks includes Citigroup, BNP Paribas, Commerzbank and Deutsche Bank
Company — YUKOS
  • Full name
    YUKOS Oil Company
  • Industry
    Oil and gas