They Won't Let YUKOS Die in the Homeland

Resuscitation


YUKOS shareholders will not be able to make a decision to declare bankruptcy after the Yuganskneftegaz auction on December 19. Sibneft shareholders (Governor of Chukotka Roman Abramovich is thought to be Sibneft's principal owner) have initiated a court ruling that is extremely favorable to the government. The company Millhouse Capital, set up to manage Sibneft, announced that on its action, the Moscow Arbitration Court has prohibited the holding of an extraordinary meeting of YUKOS shareholders on December 20. Russian state structures will not even consider the decision of the bankruptcy court in Houston, Texas, in which YUKOS filed a restructuring application.


Millhouse Capital is YUKOS's largest minority shareholder, owning 8.8% of the oil company's shares. These shares were part of last year's merger deal between YUKOS and Sibneft. The companies agreed in February to a series of deals to surrender shares to one another. Before the “divorce” was finalized, only two operations remained to be carried out. The first was to exchange the 14.5% of Sibneft shares owned by YUKOS for all of Millhouse Capital's YUKOS shares. Then YUKOS was to sell the remaining 20% of its shares to Sibneft shareholders for $3 billion – only after this would the reverse deal become a mirror deal, as written in the February protocol. We note that in September, the arbitration court of Chukotka Autonomous Region declared the exchange of YUKOS and Sibneft shares illegal; and in October, the Prosecutor General's Office seized all of the 34.5% of Sibneft shares left to YUKOS.

A source at Millhouse Capital told Kommersant that the action in the Moscow Arbitration Court to prohibit the holding of the meeting of YUKOS shareholders on December 20 was initiated in order to prevent the oil company's bankruptcy. “If YUKOS decides on bankruptcy or liquidation (this very question was on the meeting agenda – Kommersant), completion of the mirror deal becomes problematic.” He refused to comment on whether Millhouse Capital intended to reimburse YUKOS $3 billion in exchange for 20% of Sibneft's shares, saying that he had no information.

YUKOS's press service did not comment on Millhouse's actions yesterday. We note that the other day, Viktor Gerashchenko, the chairman of YUKOS's board of directors, made the following comment on the negotiations connected with the reverse deal: “First, they were going well; then the other party (Sibneft shareholders – Kommersant) was apparently told “don't be in a hurry to return the $3 billion to YUKOS – it might not be necessary”.

If the meeting makes such a decision and files a bankruptcy application in the arbitration court in the place where YUKOS is registered (city of Neftegansk, Khanty-Mansi Autonomous Area), the court could make a decision to install external management in the company.

Then a moratorium would be imposed on payment of the remaining tax arrears and the future sale of the company's assets against debts to the tax authorities. The amount of tax claims against the company has already exceeded $27 billion, of which it has paid $3.5 billion. After the sale of Yuganskneftegaz, the remaining claims will amount to about $13.5 billion. But the state will not receive this sum from YUKOS for at least six months – the minimum period of the moratorium. Clearly, this turn of events is extremely unfavorable to the tax authorities – even considering that the court to which YUKOS would apply could, under pressure from them, make decisions more favorable to them.

Meanwhile, the hearing on the application for restructuring according to American bankruptcy legislation continued yesterday in a bankruptcy court in Houston, Texas (Kommersant reported on this in detail yesterday). At the time this issue went to press, the court was still in session. YUKOS is hoping that the court will make a favorable decision and impose a moratorium on the sale of its assets. Despite the fact that the decision has no legal force in Russia, it may have consequences for the winners of the Yuganskneftegaz auction, as well for the banks that grant credits for this purchase.

Taking part in the court session is lawyer Hugh Ray, representing the interests of Deutsche Bank (one of the organizers of a syndicated loan to Gazprom for participating in the auction), which has formally protested YUKOS's application. Also participating in the session is Gazprom's defence – represented by the law firm Winston & Strawn. However, it was learned yesterday that the syndicate of Western banks has delayed granting Gazprom €10 billion to buy Yuganskneftegaz. This decision is a direct consequence of the court hearing being conducted in Houston.

Group MENATEP, YUKOS's principal shareholder, intends to launch legal proceedings against the Russian government and the auction winners immediately after it is held. Yury Kotler, the group's press secretary, told Kommersant yesterday that the first suits would be filed in Great Britain, due to the fact that Group MEMATEP is registered in Gibraltar, which is under British jurisdiction.

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Prosecutor General Gets Busy with YUKOS Staff

Yesterday in YUKOS's central office in Moscow, officials of the Prosecutor General's Office of Russia carried out large-scale investigative actions. Searches of the company's finance, legal, and human resources departments and seizure of documents kept there went on all day. Later in the day, the investigators forcibly took Anton Zakharov, the head of YUKOS's human resources department, for questioning at the Prosecutor General's office. “We don't know what he will be questioned for, for what cause or on what grounds,” a YUKOS representative said yesterday on condition of anonymity. “The investigators did not allow Zakharov to take a lawyer, showing clear disdain for the law. This looks like another action launched by Russian prosecutors to frighten YUKOS employees.

One of YUKOS's lawyers, on condition of anonymity, told Kommersant yesterday the actions of the Prosecutor General's office – the arrest last week of lawyers Svetlana Bakhmina and Elena Agranovskaya and the detention of Anton Zakharov – is the Prosecutor General's revenge for the attempts by YUKOS's management to save the company by resorting to filing an application in the Houston court.

The Prosecutor General's office is attacking in all directions. I think that regardless of whether or not this suit had been filed, the searches and detentions of YUKOS employees would have continued,” Vladimir Krasnov, one of YUKOS's lawyers, told Kommersant. “I don't understand the detention of Anton Zakharov. What else they can find at YUKOS I don't know. To my mind, they've already taken everything.” According to Elena Liptser, defense lawyer for YUKOS co-owner Platon Lebedev, what the Prosecutor General's office is doing now has no relation to the law. “There's no question that it's revenge,” she said

Yesterday, the Prosecutor General's office would only confirm that searches had been conducted in YUKOS's central office within the framework of an investigation of one of the criminal cases and that an employee of the oil company had been taken for involuntary questioning.

(From Kommersant, 12.17.2004)