27 May 2004 08:44
YUKOS SAYS IT COULD BE BANKRUPT BY YEAR-END
"There is a current court ban on the sale of any assets, including
shares, belonging to the company. While the ban is in place it is
MOSCOW. May 27 (Interfax) - Russian oil major Yukos says it could be bankrupt by the end of 2004.
impossible to sell any assets to raise liquid funds. Consequently, with the Tax Ministry continuing its activities we
can suppose that it is very likely that a state of bankruptcy will occur before the end of 2004," Yukos said in a
press release.
"It is our duty to notify our creditors and shareholders of this in a timely manner," the release says.
The Moscow Arbitration Court on Wednesday decided to recover from Yukos an additional profit tax for 2000, including
fines and penalties, amounting to 99.4 billion rubles ($3.4 billion) based on the Tax Ministry's lawsuit.
"It is also out duty to inform our shareholders and creditors of the tax payment examinations for 2001 carried
out by the Federal Tax Service. We believe there is a risk that claims similar to the above- mentioned ones could be
made on the company," the document says.
Yukos is not currently conducting negotiations with its shareholders or individuals interested in purchasing new
shares to cover the expected deficit of liquid assets in the event that the court ruling is approved. "We only know
that the board of directors has not received any proposals on this issue from one of the main Yukos shareholders
[Menatep and Millhouse groups]," says the release. Yukos may use $800 million in liquid assets to pay tax debt
Yukos may use $800 million in liquid assets if a higher instance court compels the company to pay 99.4 billion rubles
in taxes, says a Yukos press release.
The company's liquid assets may amount to $1.1-1.2 billion in the second quarter of 2004.
If the court agrees with this way of paying the extra taxes, the company could pay 60%-70% of them in the third and
fourth quarters of this year, the press release says.
"The company, acting in the interests of all shareholders, will protest the May 26 ruling of the Moscow
Arbitration Court, and do its best to meet all commitments to employees, shareholders, partners and clients," the
press release says.
"Being a meticulous tax-payer, Yukos confirms its readiness to do its best to meet the demands of governmental
institutions, if a higher instance court confirms the lawfulness of the May 26 resolution of the Court of
Arbitration," it said.
"Company management has thoroughly analyzed Yukos tax-paying practices in 2000 and other periods, and did not
find the risks of non- payment of taxes exceeding the equivalent of $3 billion in 2000. All taxes paid by the company in
2000 were equivalent to $1.922 billion," the press release says.
"The fact that three years after numerous inspections and a PriceWaterhouseCoopers audit, a governmental
organization has found, and a court has quickly confirmed, the evasion of a tax sum twice exceeding the average tax
indices in the industry is incomprehensible for us. According to the tax service and the court, the revenue tax on Yukos
in 2000 must have reached 59% of sales revenues, or 107% of profits confirmed by international audit," the press
release said.
Yukos would like to conduct negotiations with state officials on the settlement of the tax debt, Yury Beilin, deputy
head of the Yukos board, told a news conference in Moscow on Thursday.
"We will do everything possible to settle the tax debt," he said.
"Communication with state officials is non-existent at the moment," he said. "We have written the
prime minister, the Finance Ministry, and Alexander Zhukov, but we have received no response. We have not conducted any
negotiations with state officials on any specific issues," Beilin said.
"We would like to believe that the state is not planning to bankrupt the company, but is only seeking additional
taxes," he said.
On Wednesday, the Moscow Arbitration Court decided to recover from Yukos an additional profit tax from 2000,
including fines and penalties in the amount of 99.4 billion rubles (an equivalent of $3.4 billion) based on the Tax
Ministry's lawsuit. Yukos currently meeting all obligations to creditors
Russian oil company Yukos is currently meeting all its obligations to creditors, company financial consultant Frank
Riger said at a Thursday press conference in Moscow.
He said that the company does not know anything about the main creditors being involved in day-to-day company
activity.
In response to a question about in what group of creditors the state would fall in the event of bankruptcy, Dmitry
Gololobov, deputy director of the Yukos legal department, said "based on previous practice the state falls into the
group in which it needs to fall."
"We will do everything possible to regulate tax debt," he said.
He said that "at the moment there is a total lack of discussion
with state representatives." "We wrote to the prime minister, the
Speaking about the possible sale of assets, Yukos Deputy CEO Yury Beilin said that at the moment this is
hypothetical. "The possibility of selling Sibneft is the same as for any other company asset," he said.
Yukos earlier received a notice related to a $1.6 billion pre- export facility secured term loan that it was
considered by the lender that a potential event of default had occurred. "The creditor permitted Yukos and
associated companies to carry out export operations connected with the provision of the credit without any restrictions.
At the same time the creditor, if it decides, may avail of its right concerning bank accounts, the turnover of funds in
which are held in its favor as security for the credit," Yukos said in a statement. Yukos calls for talks with
state representatives
Russian oil company Yukos would like to hold talks with government representatives to regulate the company's tax
debt, company Deputy CEO Yuri Beilin said.
Finance Ministry and Alexander Zhukov but we did not receive an answer. We have not yet held substantive talks with
the government," Beilin said.
"I would like to believe that it is not the state's aim to bankrupt the company, and that it wants to
receive additional taxes," he said.
The Moscow Arbitration Court ruled on May 26 in favor of a Tax Ministry demand that Yukos should pay 99.4 billion
rubles ($3.4 billion) in taxes, fines and penalties. Bankruptcy threat sends Yukos shares tumbling
Yukos shares tumbled 4% on the MICEX Thursday, falling to 248 rubles, their level more than a year ago, from 259
rubles, on news that the company could face bankruptcy before year- end.
Yukos also slumped Wednesday evening after Moscow Arbitration Court ruled the company should pay 99.4 billion rubles
in tax debt.
Yukos shares led the market down Thursday, plunging 11.2% on the RTS to $8.35, the same price as more than a year
ago.
The company's capitalization shrunk by over $3 billion to $22.64 billion, toppling Yukos from the top three
capitalization firms and giving way to Lukoil ($24.57 billion) and Surgutneftegas ($24.3 billion). Gazprom remains in
the lead with over $46 billion. Yukos 'CCC' ratings remain on Watch Neg
Standard & Poor's Ratings is keeping its 'CCC' long-term corporate credit rating on Russian oil
company Yukos remained on CreditWatch with negative implications following the court decision that the company must pay
$3.4 billion in taxes related to the 2000 fiscal year (subject to an appeal).
In April 2004, the assets of Yukos' parent company were frozen.
These assets include shares in all key cash-generating operating
The rating has been on CreditWatch with negative implications since April 27, 2004, S&P said in a press release
Thursday.
The CreditWatch status reflects Standard & Poor's concerns that if Yukos loses the appeal, or if an
"event of default" (as described in Yukos' loan documentation) is announced by the company or its
creditors, Yukos might experience a liquidity crisis, forced sale of core assets, insolvency procedures, or effective
nationalization of its assets.
as yet unclear whether the creditors would trigger a full event of
default, whereby all Yukos debt would immediately become due and
"The court decision on the $3.4 billion tax charge increases the probability of these stress scenarios,"
said Standard & Poor's credit analyst Elena Anankina. "It also adds to uncertainties concerning liquidity;
ownership rights over key cash-generating assets; any additional tax claims relating to other fiscal years; and
governance, due to the mounting political pressure on the company," added Anankina.
Although the tax charge is not immediately payable and is subject
to appeal, Standard & Poor's notes that Yukos faces a weak judicial
subsidiaries and a 92% stake in Russia's Sibneft.
"Overall, the company's future appears to depend largely on the
course of action that various arms of the Russian government will
Yukos faces "potential event of default" on its $2.6 billion financial debt, which restricts its ability to
raise funding and to withdraw cash from exporter accounts used to secure syndicated bank debt. It does not, however,
require immediate repayment of debt. It is
payable. These mounting potential claims cannot be fully satisfied by the company's cash reserves, despite
strong cash flow generation in the currently favorable oil price environment.
system and high political risk in Russia.
choose," said Anankina.
Standard & Poor's will continue to closely monitor the situation around Yukos.
[Interfax] |
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