Yukos plunges on fears of asset sales

Shares of Russian oil company Yukos fell Monday as fears intensified that the firm's key Siberian unit would be sold cheaply after a deadline to pay back taxes expires next week.

Yukos had fallen 11.3 percent on the Moscow Interbank Currency Exchange by 5 a.m. ET after the Financial Times reported that state authorities were considering launching a fresh $3 billion tax demand against Yukos' main producing unit, Yugansk.

"The aim of this new tax demand appears to be to reduce the value of Yugansk to enable some of the state companies to acquire it," UFG brokerage said in a note.

Yukos must pay $3.4 billion in back taxes for 2000 by Aug. 30, something the firm says it can't do as it lacks spare cash and is banned from selling non-core assets.

Bailiffs are unwilling to unfreeze Yukos' assets, threatening instead to sell Yugansk, which accounts for 60 percent of output of Russia's top oil exporter. Last week the state hired investment bank Dresdner Kleinwort Wasserstein to value Yugansk.

Yukos' troubles are part of a broader judicial campaign, seen by many analysts as orchestrated by the Kremlin to punish its politically ambitious founder, Mikhail Khodorkovsky, who is on trial on charges of fraud and tax evasion.

"The new claim would reduce the market value of Yugansk, making its price cheaper and, therefore, easier to afford for any potential buyer," said Renaissance Capital.

Tax officials have said Yukos may be presented with a new tax evasion claim for a total of $3.4 billion for 2001. UFG said it expected the final total claim to amount to $10 billion, while Renaissance said it could rise to $14-$15 billion.

Many analysts said that pushing the total back tax bill to as high as possible was the only strategy left for the state in a situation when Dredsner was likely to announce a high starting price for Yugansk.

Many analysts say a fair price for Yugansk would be at least $15 billion, and only a Western major or a Chinese firm could afford buying it, while Moscow was very reluctant to let it end up in foreign hands.

"We reiterate our belief that no foreign company will be allowed to bid for Yugansk," said Raiffeisenbank, which values Yugansk at $16 billion.

"The latest move may be designed both to reduce the value of the main production subsidiary and to dissuade Western bidders from taking part in any future auction," UFG concluded.

HERE