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American Buys YUKOS Debt-Laden Foreign Assets

August 16, 2007 | Kommersant

Two last assets of the bankrupt oil giant YUKOS went under the hammer on Wednesday, finishing the company’s long carve-up. Dutch-registered Yukos Finance, which may be worth $2.7 billion, was sold for $308 million to a little-known company reportedly linked to state-controlled Rosneft but now owned by a U.S. citizen. The American yet has to reach agreement with YUKOS former top managers who run Yukos Finance. Should all legal problems be settled, Rosneft may end up the beneficiary of YUKOS’s foreign assets.
The Wednesday auction was selling YUKOS’s receivables and its Dutch unit, Yukos Finance. Two companies, Versar, which has unsuccessfully bidden at other YUKOS auctions, and Promneftstroi, paid a deposit to take part in the sales. Promneftstroi won offering 7.838 billion at the sixth increment, which is 3 percent above the starting price.

Promneftstroi was affiliated with state-run oil firm Rosneft until June 30. According to the Russian state register, the company was set up by RT Trade, controlled by Rosneft. The oil giant, which earlier announced its plans to buy Yukos Finance, said Wednesday it did participate in the auction, but would not give further comment. Promneftstroi has recently been sold to Monte-Valle. The firm’s founder, U.S. citizen Steven Lynch confirmed the information. Mr. Lynch did not name the price of the deal, but said that Promneftstroi is a recent purchase. “We’ve got a plan how to work with these assets, including legal matters,” he said in an interview with Kommersant, but declined to specify. A Kommersant source close to Rosneft says that Monte-Valle bought Promneftstroi “together with a right to bid at the auction.”

Monte-Valle was one of the few firms to down Rosneft in YUKOS sales. In April, the company bought 3.2 percent in TGK-4 as well as control in Tambov and Belgorod energy companies for 3.5 billion rubles. Mr. Lynch said then that he was considering selling some of the assets to his “long-time business partner” David Herne.

Mr. Herne is a well-known American businessman who is investing in Russia through Halcyon Advisers. He also chairs the reform committee at the Russian national power grid UES of Russia. Partnership with Mr. Herne is the only thing known about Steven Lynch. David Herne would not comment his partner’s purchase. A source close to the American says that Mr. Herne had no connection with the deal.

Yukos Finance is an asset with a history of protracted legal battles. YUKOS official receiver Eduard Rebgun never managed to gain control over the Dutch firm which is currently run by YUKOS former top managers. Mr. Rebgun repeatedly tried to topple Yukos Finance executives Bruce Misamore and David Godfrey but to no effect. The matter is still pending in courts. Eduard Rebgun does not even have the full list of Yukos Finance’s assets. As a result, the company was put up for sale at book cost.

Yukos Finances controls $1.492 billion in cash raised from the sale of 53.7 percent in Lithuanian refiner Mazeikiu nafta and 49 percent in Slovakia’s Transpetrol pipeline firm.

The Amsterdam Court in May satisfied a claim by Glendale, headed by Mr. Misamore, to apply protective measures on property of Yukos Finance in a suit to raise ?130 million promissory note debt from Yuganskneftegaz, YUKOS’s former asset which now owned by Rosneft. Cyprus-based Moravel, affiliated with YUKOS’s major shareholder Group MENATEP, is claiming a further $700 million. Rosneft as YUKOS’s creditor was also seeking some money of Yukos Finance but its claims were settled in the YUKOS bankruptcy in Russia.

Even if Yukos Finance does have money left to cover creditor claims, the company is clearly not going to give it to anyone. “Dutch assets ought to remain available to legitimate shareholders of YUKOS,” Yukos Finance spokesperson Claire Davidson told Kommersant on Wednesday. She says the company’s managers have never been in contact or in talks with Mr. Lynch. Yukos Finance said in a statement that it is managing assets, cash and securities worth ?2 billion, or about $2.7 billion. Ms. Davidson described the Wednesday auction as illegitimate. She added that Promneftstroi will yet have to prove its ownership right on the firm in Dutch courts. YUKOS shareholder Leonid Nevzlin says he does not know Mr. Lynch. After Yukos Finance repays the debts, it will have some $600 million in money and assets left, Mr. Nevzlin estimates.

Industry experts believe that Russian authorities are anxious to wrap up YUKOS bankruptcy procedures as soon as possible. Official receiver Eduard Rebgun was asking to extend the firm’s bankruptcy period, which expired in early August, for six month, but a court ruled to give three months. “Russia wants to shake off the YUKOS story ahead of elections,” says Maxim Shein, analyst at Broker Service Credit. “But the bankruptcy must be completed so that all property is sold.” For example, there were no bidders for YUKOS-Transservice. But the lot later received YUKOS trade marks and was finally sold Rosneft. Konstantin Batunin from Alfa Bank says he is sure that the state-owned oil giant will end up managing assets of Yukos Finance if Mr. Lynch succeeds in determining their legal status.

Company: YUKOS

Full company nameYUKOS Oil Company
Country of riskRussia
IndustryOil and gas


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