Gazprom Left without Sponsors

// Unsecured Application


Yesterday it was learned that the consortium of creditor banks refused to sign a €10 billion loan agreement with Gazprom for participating in the auction to sell Yuganskneftegaz. The banks, especially the American J.P. Morgan Bank, are awaiting the verdict of the Houston court where YUKOS, the owner of Yuganskneftegaz, has filed for bankruptcy. If the situation with the creditors is not settled today, Gazprom will have to take its chances: it will go to the December 19 auction without guarantees of financing for the future purchase.



A meeting of Gazprom's board, at which a discussion of the progress in implementing an export strategy in Europe and the awarding of branch-industry prizes appeared on the agenda, began at ten in the morning and finished only at seven in the evening. According to information from Gazprom's press service, no decisions were made on Yuganskneftegaz, including questions relating to the loan agreement. This is due to the fact that yesterday the six banks that are proposing to grant credit to Gazprom to acquire Yuganskneftegaz decided to suspend work on syndicating the credit. The signing of a framework agreement was initially planned for December 15.

“According to our information, in their agreement, the banks understood that a large American bank must figure in the syndicate, which was actually organized by ABN AMRO and Deutsche Bank. J.P. Morgan is the most vulnerable to prosecution in the US if YUKOS succeeds in getting a ban put on crediting of the buyers at the Yuganskneftegaz auction. As a result, the banks decided to wait and see what the court in Houston decides”, an anonymous representative of a Russian investment bank familiar with the situation told Kommersant. As before, the syndicate member-banks are not commenting on the situation.

At the banks, they are saying privately that a decision on syndicating the credit will probably be put off until Monday, or even later, if the court in Houston does not decide today that it is the improper jurisdiction for YUKOS's suit. Sources close to Gazprom claim that the company now has enough funds to pay the deposit of $1.7 billon on December 18 for participation in the auction (part of the funds are to be provided by Gazprombank and part by Deutsche Bank). “It can't be ruled out that Gazprom will first decide to win the auction and then take out the loan,” says Kommersant's source.

The risks of the game are very high. The meeting of Gazprom's board of directors, which will determine the exact amount of funds required from the syndicate, will be held on December 23. Payment to the Russian Federal Property Fund (RFFI) of the auction price of Yuganksnefetegaz is due within 14 days of the auction.

Thus, the court in Houston could very well contend with the bank syndicate in the expectation that in so doing, the primary risks fall on Gazprom. If it is unable to pay, under the RFFI's terms, the $1.7 billion becomes the property of the state. This is unlikely to suit structures of Surgutneftegaz, which will probably be Gazpromneft's “double” at the auction. The company is unable to pay even the starting price of $8.65 billion.

Theoretically, RFFI could earn more than $1.7 billion on a failed auction, but this would hardly be an acceptable result for the government. The fate of the auction is in the hands of an American court. If a decision is made today in Houston to impose security measures under YUKOS's suit, RFFI or the bailiff service, on whose instructions the auction is being held, will probably decide to cancel it. If Gazprom's loan falls through after Gazpromneft's win, this will cause a scandal in the president's administration. Dmitry Medvedev, the head of the administration and chairman of Gazprom's board of directors, supported the plan to have Gazpromneft participate in the auction, whereas, according to Kommersant's information, his deputy, Igor Sechin, who is chairman of Rosneft's board of directors, lobbied for another plan to absorb Yuganskneftegaz.

(From Kommersant, 12.17.2004)