Bid Interest Halts Share Slide of YUKOS

An offer by UK-based investors to rescue Russian oil firm YUKOS arrested a dramatic slide in the bankruptcy-threatened company's share price on Friday, but analysts doubted a life-saving deal was possible. YUKOS shares plumbed 30-month lows this week after bailiffs announced their intention to sell core unit Yuganskneftegaz, which produces 60 percent of the group's 1.7 million barrels per day of crude, a move the company says will cripple it.

With its bank accounts frozen by courts demanding $7 billion in back taxes -- half immediately -- Russia's largest oil firm warned it may be broke by mid-August. But it stopped short of filing for bankruptcy, keeping investors' hopes alive.

A consortium led by former YUKOS board member Konstantin Kagalovsky sent a letter to President Vladimir Putin offering to buy out main shareholders including Mikhail Khodorkovsky, who is on trial for fraud and tax evasion.

"Our intentions are serious. You don't joke about these sorts of things. Billions are at stake," Kagalovsky told Reuters.

YUKOS rouble shares closed up 0.35 percent higher at 154.00 -- but still down on the week. The less liquid dollar stock rose 5.94 percent to $5.35.

The government has already received other rescue proposals from YUKOS and other companies, but has so far failed to respond to them.

U.S. ambassador Alexander Vershbow, visiting YUKOS headquarters a day after the company's latest statements, described the official silence as baffling.

"We are somewhat puzzled by the lack of any response thus far to these proposals, but we hope that a solution can be found that would allow this Russian company to continue to do business," Vershbow said after meeting YUKOS CEO Steven Theede.

WELCOME BID

Kagalovsky, a former aide to Putin's predecessor Boris Yeltsin, did not say how much the group could pay. One of Khodorkovsky's lawyers said his client welcomed the bid. Another flew to Britain, where the group is based.

"Mikhail Khodorkovsky ... welcomes any actions aimed at resolving the situation around the company. In any case, the last word remains with the board and he hopes it will make the right decision," his lawyer Genrikh Padva told reporters.

Padva was speaking during a break in Khodorkovsky's trial, where judges turned down a defense plea for charges to be dropped relating to a company acquisition a decade ago. He faces imprisonment for up to 10 years if convicted.
Analysts say YUKOS's demise is a Kremlin punishment for Khodorkovsky's political ambitions.

Putin, meeting local leaders in southern Russia, restated his opposition to any review of privatisation deals clinched in the turbulent aftermath of the collapse of Soviet rule, some in murky conditions.

"I believe that it should be clear to us all that this procedure can be carried out only in the framework of court rulings," Russian news agencies quoted him as saying.

"There can be no question here of political decisions. It is absolutely out of the question."

Analysts said the chances of the Kagalovsky bid were no better than earlier failed overtures.

"To the best of our knowledge, nobody has yet received any response to their letters. It will be no surprise then if these latest proposals from the consortium meet a similar fate," UFG brokerage said in a research note.

U.S. ambassador Vershbow said the handling of the YUKOS case could damage Russia's investment climate.

"We are certainly interested in seeing our energy partnership with Russia grow and seeing Russia establish a climate for foreign investment that is welcoming," he said.

"The handling of this case, however, could have very different effects."



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