YUKOS in Loan Default, Shares Tumble

Russian oil giant YUKOS, its main owner on trial and facing a huge tax bill that could drive it into bankruptcy, said on Monday that a group of creditor banks had declared it in default.
The pressure on YUKOS is widely seen as orchestrated by the Kremlin which wanted to snuff out the political ambitions of key shareholder Mikhail Khodorkovsky who is on trial for fraud and tax evasion. "On July 2, we received the default notice from the banks which helped us organize the $1 billion loan," YUKOS spokesman Alexander Shadrin told Reuters.

The news pushed YUKOS shares sharply lower again.

They opened 13 percent lower at 180 roubles on Moscow's MICEX exchange and one of Russia's leading brokerages, UFG, said it was suspending ratings and financial forecasts for YUKOS after the latest events.

YUKOS shares -- down by more than half since early April -- dropped up to 17.5 percent on Friday after the firm received a new tax bill for a further $3.4 billion, and the company warned it might have to cut production this week. The default announcement came hard on the heels of an eight hour raid on YUKOS' Moscow headquarters on Saturday, during which tax police seized documents, computer discs and safes, and days before a deadline for payment of a $3.4 billion tax bill the firm says it cannot meet.

YUKOS pumps around a fifth of Russia's total oil production.

Saturday's raid on the YUKOS headquarters was the latest legal swoop on the firm's offices, but one which analysts said could further dent the share price.

"This will negatively influence the operation activities of YUKOS and arouse serious discontent among the company's minority shareholders, including foreign shareholders, and may lead to an even sharper fall in the company's share price," said Sergei Suverov, analyst at Zenit Bank. The Vedomosti newspaper said on Monday a group of YUKOS minority shareholders were suing the firm's managers, owners and auditors, PricewaterhouseCoopers. It said law firm Lerach Coughlin Stoia & Robbins had filed the suit in New York on Friday.

U.S. ambassador to Russia, Alexander Vershbow, said on Sunday there was an obvious political element to the YUKOS and Khodorkovsky cases.

"I think everyone recognizes there is a political and an economic dimension to it," he said. "But we just hope that a fair verdict is given."

YUKOS has until Wednesday evening to pay the $3.4 billion tax bill for 2000, but with frozen bank accounts it cannot even sell off assets to help. It has not yet been set a deadline to pay a further claim for the same amount for 2001.

The YUKOS spokesman did not name the creditors that had declared it in default.

But last week, a Moscow court ordered a freeze of YUKOS bank accounts, a move the firm said would make it difficult to continue export trading activities related to the export-backed loan.

That $1 billion pre-export facility was arranged by a number of leading Western banks.

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