29 May 2004 00:00
The brink of ruin THE LEX COLUMN:
Yukos faces an uncertain future, but the final outcome looks increasingly
stark: capitulation or bankruptcy. Both outcomes could lead to greater state
control, but the Kremlin's ultimate intent is unclear.
If the Kremlin wants to force 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 Dollars 3.5bn tax claim against Yukos. It is clear that the legal
system will be compliant in pushing the company to the brink of bankruptcy.
The ruling also sends a message to Mr Khodorkovsky about the treatment he can
expect as his own court case finally gets under way.
But even if Mr Khodorkovsky were feeling inclined to capitulate, the Kremlin
might be in no mood to listen 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 Dollars
9bn-Dollars 10bn. If the Kremlin demands immediate 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 Dollars 22.50. This may
prove attractive for brave souls, and logic argues against the stock ending
up worthless. But, with room to push Yukos even closer to the brink, the
discount could get still wider before a final resolution.
[LEX COLUMN] |
RUSSIA IN FACTS
