Yukos has lost its main asset, Yuganskneftegaz, sold in an auction held by the Russian Fund of Federal Property, for $9.35 billion. The buyer was a little known company OOO “Baikalfinansgroup”, although most familiar with the matter suspect that the real buyer was the state-owned Gazprom or another major oil company Surgutneftegaz.
The auction itself had an aura of mystery. Initially, four companies applied for participation, including Gazprom’s affiliate Gazpromneft, Interkom, Baikalfinansgroup and First Venture Company. Yet only two bidders appeared transferred the collateral of $1.7billion to the Property Fund account and sent their representatives to the auction. Referring to the unprecedented security measures, the authorities allowed entrance to the auction room only to accredited persons, blocking the lawyers of Menatep, a company with a large stake in Yukos, from coming despite their wish to see the court decision in action. The Gazprom representative did not make a single bid above the proposed starting price, and left the room to make a call after Baikalfinansgroup’s first bid, announcing on his return that his company will not make more bids.
The sharp surge of interest in Baikalfinansgroup has been rewarded with scarce information. The company is registered in Tver, a central Russian city not far from Moscow and named after a lake in Southern Siberia. It does not appear on the official databae of the Federal Tax Service available from its website.
Yuriy Petrov, the acting director of the Property Fund, said in a press conference the victory was as much a surprise to the fund representatives as for the journalists. “We do not know anything about this company,” he said.
``Not knowing who is behind a newly formed shell company in a $9.34 billion sale is extremely opaque. It is disappointing,’’ said Timothy McCarthy, chief investment officer at Troika Dialog, which oversees $570 million. ``This is typical of the opacity of the Russian privatization process of the 1990s.’’
Yuriy Savvin, head of the auction committee, said that the Property fund has no information as to whether the auction winner is in a position to pay the announced price of $9.35 billion. In his words, the Fund is not responsible for checking out the winner’s financial capacities, it only will see that the collateral is deposited in time.
According to the Russian laws, Baikalfinansgroup now has 14 days to transfer the necessary amount to the regulators. Otherwise, the 43 Yuganskneftegaz shares representinf a 76.79% stake in the company will become state property. “Kommersant”, a renowned Russian business publication, claims that eventually the stock will end up in Gazprom’s possession anyway through one or the other financial scheme. The primary goal of the state to demonstrate the formal transparency of the auction has been achieved, and now the fight for Yuganskneftegaz stock will continue under cover.
A few days before the sell-off Yukos management applied for Chapter 11 bankruptcy protection in a Houston court. Judge Leticia Clarke put a ban on the auction and restricted Gazprom, Interkom, First Venture Company from participating as well as major international banks Gazprom tapped for a syndicated loan to finance Yuganskneftegaz purchase. Mr. Petrov said that the Federal Property fund did not receive any official documents related to the decision of the Texas court, adding that in any case this decision cannot apply to the Fund’s activities and would only have been regarded as a recommendation.
Stephen Dashevsky, expert from “Aton”, believes that the sale of Yugansknefegaz accounting for 60% of Yukos oil output will provoke imbalance between crude oil production and processing. Yugansk plant was expected to produce 50 milion tons of crude in 2004, adding to the 34 million tons produced in other Yukos plants, Tomskneft and Sarmatneftegaz. The company plans to process 34 million tons.Dashevsky believes that Yukos could pay off its huge tax debt bill, were it allowed to pay in installment though this will hardly be the case.
The press service of Yuganskneftegaz announced that the plant contiues to operate in the usual mode and expects to be able to meet the annual production targets with 52 million tons of crude oil output. The accounts of the unit have been arrested, and the employees did not get their November salaries, but this delay has little effect on the production activity.
The sale of Yuganskneftegaz did not provide sufficient capital to cover the huge tax bill of $25billion Yukos confronts, and so further sales of Yukos assets can be expected.
``This signals the end of Yukos as an independent company,’’ said Chris Weafer, an analyst at Alfa Bank in Moscow. ``It can’t possibly survive with the level of cash flows from its remaining business. The remaining assets will probably be sold or confiscated.’’