YUKOS Gets More Cash But Bankruptcy Looms

Russia's YUKOS raised $357 million to put toward a $3.4 billion tax claim on Tuesday by selling a stake in a gas venture to partner TNK-BP, as analysts said the company was technically ready for bankruptcy.

YUKOS is trying to pull together every penny it can to pay down the potentially ruinous tax bill, and Rospan is the first non-core asset it has managed to sell. YUKOS itself is banned from selling assets but Rospan was owned by a subsidiary.

It is looking for ways to raise money on sales of non-core assets to prevent bailiffs from selling its core oil units.

Sources close to the deal said YUKOS had sold its 56 percent stake in Rospan to BP's Russian vehicle, which owns the remainder, just as a court refused to suspend collection of the tax payment.

"The transaction took place today," one source said.

With the company's ultimate survival in doubt, analysts said on Tuesday that the core owners of YUKOS, led by its incarcerated founder Mikhail Khodorkovsky, may be preparing to declare the firm bankrupt to try to protect at least some of their money.

Despite surging oil prices, YUKOS on Monday reported a net loss of $2.65 billion in the first half of this year, compared with a net profit of $1.35 billion a year ago.

The figures are under Russian accounting standards, which are generally ignored by investors, but analysts say they could allow it to go into liquidation.

YUKOS has been ordered to pay $3.4 billion by the end of the month. Bailiffs are taking money from the company's accounts, making it hard for Russia's top oil exporter to fund operations.

The company has come under intense pressure over tax arrears in a judicial campaign that many analysts see as being directed by the Kremlin, apparently as punishment for YUKOS's major shareholder, Mikhail Khodorkovsky, after he used some of his massive wealth to further political ambitions.

Also on Tuesday YUKOS lost an appeal to pay off the tax debt with shares it owns in oil company Sibneft. It still holds 20 percent of Sibneft after Chelsea football club owner Roman Abramovich and his partners, former Sibneft controlling shareholders, pulled out of a merger.

The onslaught against YUKOS and Khodorkovsky is seen as a warning to Russia's other super-rich businessmen to stay out of politics, which the Kremlin views as its domain.
SAVING WHAT'S LEFT

UFG brokerage said first half results showed YUKOS subsidiaries and its main owners, represented by Group Menatep, controlled about $10 billion of YUKOS liabilities at the end of the second quarter, up from $7 billion as of March 31.

Under Russian law, the courts must rule on whether a bankruptcy declaration is valid.

If a bankruptcy filing is accepted, the company comes under a "state of supervision," which shields it from the sale of assets and can last for months.

Analysts say they doubt courts would accept YUKOS's bankruptcy filing, but UFG said that because the company showed negative net assets of $2.1 billion as a result of growing liabilities, it could announce self-liquidation.

"In the event of self-liquidation ... creditors would receive their money, while shareholders, including portfolio investors, may receive little or nothing," UFG said.

Menatep shareholders would be treated as creditors because of loans they have made to their own firm.

The company's chairman, Viktor Gerashchenko, told Reuters on Monday the firm would refrain from declaring bankruptcy for as long as possible.

But Chief Financial Officer Bruce Misamore told the Financial Times newspaper on Monday the firm may declare bankruptcy soon.

SUBSIDIARIES SELL OIL

To protect its business, YUKOS appears to be hiving off business to subsidiaries and making intra-group loans, Aton brokerage said in comments on the first half results.

By granting oil sales rights to subsidiaries, the parent company keeps some revenue from going to its frozen bank accounts from being confiscated, thus keeping some money for operational activities, said Aton.

Russia's state railways company said on Tuesday that YUKOS was paying for shipments, including key deliveries to China, through its trading arms.

"We are shipping, they are pumping, the Chinese are paying," a railways spokeswoman said. "It is as simple as that."

HERE