Investors were given a faint hope that Yukos might yet escape bankruptcy proceedings last month when Russian oil company Rosneft agreed to acquire $482 million of outstanding debt that Yukos owed to a consortium of international lenders.
The banks initiated bankruptcy proceedings early in March but it became apparent several days later that an agreement dating from December covered Rosneft’s assumption of the debt.
Rosneft had bought Yuganskneftegaz, Yukos’s key production asset, in December 2004 after it was seized by the state to settle unpaid tax claims.
Analysts have been encouraged by the move, and say that it offers a slim chance that Yukos might not be totally dismantled. “By acquiring the company’s debt, Rosneft puts itself into the driving seat in the process of bankrupting the failing oil company while also acquiring the option of avoiding the bankruptcy altogether,” argues Steven Dashevsky, head of research at Aton Capital in Moscow. “If the Moscow arbitration court decides to introduce external management during the court process, Rosneft’s candidates will be the obvious first choice.”
News that Rosneft had assumed the debt led to a 30% jump in Yukos’s share price, as market participants clung to the slight possibility that the company might be saved. According to information from Yukos, the agreement between the banks and Rosneft was signed on December 13, showing that the transaction had been carefully planned in advance. It is unclear why the group of banks, led by SG, launched the lawsuit given that the agreement had already been reached late last year.
Yukos’s future remains uncertain, however. Rosneft could still proceed with Yukos’s bankruptcy proceedings, forcing Yukos to sell its assets and rendering its stock worthless.
Another possible outcome, argues Oleg Maximov, oil and gas analyst at Troika Dialog, is that Rosneft’s direct involvement might lead to a negotiated settlement in which the state company would inherit Yukos as a whole from Yukos shareholder Menatep. “In this case,” says Maximov, “minority shareholders of Yukos might indeed be saved. For both the state and Rosneft, this might be a more desirable and less messy way to wind up the Yukos saga. This would secure a much higher IPO valuation for Rosneft and arguably reduce the risks of future lawsuits.” The problem with this option, though, is that Menatep would have to agree to whatever settlement terms the state might offer.
Analysts agree that the case’s outcome is important not just for Yukos but for Russia more generally – “clear resolution will give the market even greater impetus,” argues one.
