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Banks Want Yukos Ruled Bankrupt

A syndicate of Western banks has filed a petition in the Moscow Arbitration Court for Yukos to be declared bankrupt, the oil firm said Friday, suddenly opening the way for the state to swallow up the remains of a company that has experienced the biggest reversal of fortunes since the Soviet collapse.

The banks, led by France's Societe Generale, filed their petition on Friday on claims of $482 million outstanding on a $1 billion loan, Yukos' London-based spokeswoman Claire Davidson said. An unnamed court official told Interfax that the court had immediately agreed to hear the petition, speeding up a procedure that normally takes five days. Calls to the court Friday were not answered.

"Maybe we're now seeing the endgame," said Tim Osborne, managing director of GML, Yukos' main shareholder, once known as Group Menatep. The group, once one of the biggest business empires in Russia, has been the target of a relentless politically charged attack for more than two years. Its founders, Mikhail Khodorkovsky and Platon Lebedev, are serving eight-year sentences in Siberian prison camps, while Yukos is a shadow of its former self after its main production unit was taken over by the state in December 2004.

"Maybe we're now seeing how they're going to take it under state ownership. This has only been a question of time," Osborne said.

But even as Yukos reeled from the sudden bankruptcy suit, executives in London were considering a last-ditch offer from the Lithuanian government to buy its Mazeikiu Nafta refinery in Butinge. The company received the offer late Friday, Davidson said. If acted on, the deal, potentially worth up to $1 billion, would enable Yukos to pay off the banks' claims.

It was not clear, however, whether the offer had come too late for Yukos to avert the bankruptcy suit amid mounting state pressure on its employees. Yukos' chief lawyer in charge of the Mazeikiu deal was in Moscow over the weekend after receiving a summons from the prosecutors for questioning, leaving managers in London without his guidance, Davidson said.

But while the firm still held out hope for a sale before bankruptcy goes into force -- a process that could take up to three months -- others said state pressure could make it difficult.

"The company has been paralyzed by pressure from the prosecutors," said Alexander Temerko, a Yukos shareholder and a former senior vice president at the company, who is now living in London. "Management has to make a decision on Mazeikiu. But the state keeps on trying to block it."

The banks' filing came at the end of a treacherous week for Yukos in which it finally appeared to be heading toward collapse. The firm's lead executive in Moscow, Anatoly Nazarov, declared mutiny on Monday against his seniors running the company from self-imposed exile in London and said he was taking over command. Some within Yukos saw Nazarov as acting on orders from the state.

It was still unclear over the weekend how the company's London-based chief executive, Steven Theede, would resolve the Moscow rebellion. A planned meeting in Kiev on Monday to discuss the standoff has been called off, a Yukos representative in Moscow said.

Until this week, Yukos had looked as though it was keeping its head above water, despite a freeze on its accounts and the takeover of its biggest oil unit, Yuganskneftegaz, by state-owned Rosneft. It said last month it had managed to pay off $21 billion of its staggering $33 billion back tax bill. In the meantime, it sold its 49 percent stake in Slovak pipeline operator Transpetrol for $103 million to Russneft, and it was continuing to haggle over bids for Mazeikiu.

Under a ruling by a Dutch court, the Western banks would have been first to collect from the sale of these foreign assets. Under their Russian bankruptcy filing, however, foreign banks would be last in line to recover funds from Yukos after employees and the state and state-owned companies were paid, which raised some eyebrows over why they filed the bankruptcy suit at all.

But Menatep's Osborne said the writing had long been on the wall. He said the Russian government had blocked Yukos every time it neared a deal to sell Mazeikiu and claimed the banks were now acting in consort with Rosneft, the country's new oil champion, by filing the bankruptcy suit.

"The banks are acting on Rosneft's behest," he said by telephone. "Rosneft has given some sort of guarantee to the banks that they will get both their funds and involvement in the Rosneft IPO."

Proof of this, he said, was in Rosneft's recently published GAAP accounts for the first nine months of 2005. In those accounts, which are posted on its web site, Rosneft said it reached agreement in December 2005 with Societe Generale over "regulating" the guarantee on the $1 billion loan held by Yuganskneftegaz. Yugansk had been the guarantor on the $1 billion loan to Yukos, but until December Rosneft had declined to recognize its liability for the debt. Rosneft said in the accounts that the agreement would come into force no later than April 30, 2006.

For Yugansk to take on the guarantee, the banks, either by filing for bankruptcy or announcing default, have to establish that Yukos cannot pay, Temerko said. "Alternatively, they could have waited for the sale of Mazeikiu," he said. "But there was no announcement and then the whole process inside the company got out of control."

Under the circumstances, Temerko said, it was no surprise the banks acted as they did.

"The only way out of this crisis situation is to announce the results of the tender for Mazeikiu," he said.

But as company management collapses amid infighting and claims by the teams in both Moscow and London that money is being lost, the sale of Mazeikiu has become a hot political issue.

The Kremlin has been hindering the sale of Mazeikiu to Yukos' preferred candidates, Kazakhstan's KazMunaiGaz and Poland's PKN. Both companies bid more than $1 billion, while the more-favored candidates for the Kremlin, LUKoil and TNK-BP, bid much less.

In November, as the bids were being submitted, Russia's national pipeline monopoly stopped KazMunaiGaz from going ahead with plans to ship crude to Mazeikiu.

To increase pressure on Vilnius over the sale, Moscow slashed oil supplies to Lithuania at the beginning of this year, putting the squeeze on vital revenues.

Rosneft president Sergei Bogdanchikov said last month that the state-owned oil firm could be interested in acquiring the Lithuanian refinery itself, though the company has little spare cash.

Rosneft has been trying to call the shots at Yukos' Moscow office already, making use of the firm's refineries and transportation networks and pressuring managers there to do its bidding, Temerko has said.

Earlier this week, Rosneft declined to comment on his claims.

As a decision on Mazeikiu gets bogged down, foreign banks are also eyeing big commissions from involvement in this year's expected initial public offering of Rosneft on foreign exchanges. The government has said it wants to raise up to $20 billion from the sale, making it potentially the nation's biggest-ever IPO, despite the threat of lawsuits from aggrieved Yukos shareholders.

Societe Generale declined to comment Friday. Other banks in the syndicate include Deutsche Bank, Citigroup, BNP Paribas, ING and Commerzbank.

Under Russian legal procedures, it could take more than three months before bankruptcy proceedings get off the ground. The court must first appoint a judge and then a temporary manager, opening the way for a potential deal with the Lithuanian government first.

Lithuanian Prime Minister Algidas Brazauskas said Friday that the Lithuanian parliament had approved a $1 billion credit line for the government to buy the shares, The Associated Press reported.

(The Moscow Times 13.iii.06)

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