28 May 2004 00:00
Lex live: Yukos
Yukos faces an uncertain future, but the final outcome looks increasingly binary: capitulation or bankruptcy. The
choice between the two outcomes, however, is difficult to fathom given that the Kremlin's ultimate intent is
unclear.
If the Russian government's attack on Yukos is designed to increase the pressure on Mikhail Khodorkovsky and
other leading shareholders to relinquish control of the oil group, it took a step nearer its goal this week. The Moscow
Arbitration Court, in a one-sided hearing, upheld a $3.5bn tax claim against Yukos. That makes it clear that the legal
system will be compliant in pushing the company to the brink of bankruptcy. It also sends a message to Mr Khodorkovsky
about the treatment he can expect as his own court case on fraud and tax evasion charges finally gets under way.
But, even if Mr Khodorkovsky were feeling more inclined to capitulate, the Kremlin may be in no mood to negotiate if
its aim is forced liquidation followed by renationalisation. Yukos expects further tax claims for the years since 2000,
with estimates of the total tax bill, including penalties, as high as $9-$10bn. If the Kremlin demands immediate, rather
than staggered, payment and maintains an injunction on asset sales Yukos admits it could face bankruptcy. This, however,
requires the Kremlin to follow an irrational course to its logical conclusion, inflicting severe damage on Russia's
standing in international capital markets.
Yukos' shares now trade at a 45 per cent discount to a discounted cash flow valuation, based on a long-term
Brent crude price of $22.50. This may prove attractive enough for brave souls and logic argues against the stock ending
up completely worthless. But, with room to push Yukos even closer to the brink, the discount could get even wider before
a final resolution.
[FT.com site] |
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