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Russia: Rosneft muddies the Yukos bankruptcy waters

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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.

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