18 June 2004 03:28
Putin Tip Powers Yukos Recovery
President Vladimir Putin said Thursday he had no desire to bankrupt Yukos, igniting the biggest stock market rally
since he came to power.
"The official authorities of the Russian Federation, the government and the country's economic authorities
are not interested in the bankruptcy of a company like Yukos," Putin said during an official visit to the Uzbek
capital, Tashkent.
Yukos' share price, which had been relentlessly driven to two-year lows by the prolonged legal assault on the
company, exploded.
In a session so frenzied that trading in the stock had to be stopped for an hour, Yukos shares ended the day up an
astounding 34.2 percent, lifting everything else with it. MICEX and RTS indices rose 8.8 and 10.1 percent respectively,
a gain on the RTS last seen when Boris Yeltsin unexpectedly handed Putin the keys to the Kremlin on Dec. 31, 1999.
Putin's rare public remarks about a case that has chilled investors the world over, came on the eve of what
could be a fateful showdown between Yukos, Russia's largest oil exporter, and tax officials who claim the company
owes $3.4 billion in back taxes.
If the Moscow Arbitration Court rules in favor of the Federal Tax Service's claim in hearings scheduled Friday
and calls for immediate payment, the company could go into financial meltdown.
But even though Putin's comments seemed at first glance reassuring, it is far from clear that the company is out
of the woods. Putin said the company's fate would, however, ultimately be decided in the courts.
"The government will do all it can to prevent the collapse of the company," he said, Interfax reported.
"But what happens in the courts is a separate matter. The courts should speak of this themselves."
A section of Yukos' management team went into overdrive Thursday in a bid to head off a potential collapse,
sending a proposal to Prime Minister Mikhail Fradkov to pay off the company's tax debts via the sale of Group
Menatep shares.
"[Management is forwarding] a restructuring of shares belonging to Menatep as the most optimal solution to the
situation," said a source at Yukos, who wished to remain anonymous. He added that management was proposing that
Menatep's shares in Yukos could either be sold off to government-approved companies or at auction.
The letter, a copy of which was obtained by The Moscow Times, calls for a stage-by-stage buyout of the Menatep stake,
a restructuring of future tax payments and "negotiations on a sell-off of some company assets to state-owned energy
companies."
The proposal says "the financial policies of former top management and the company's major shareholders
during 2000 to 2003 led to significant nonpayment of taxes and have brought Yukos to the edge of financial
insolvency." It says management "foresees the need to make significant additional tax payments" whether
the court rules it has to or not.
"The imminent use of all Yukos' cash resources to pay the Tax Ministry will lead to a complete halt in
current production investments and a decline in output, which will negatively affect forthcoming tax payments," the
letter says.
But in a sign the proposal was not backed by the entire company, several top Yukos officials Thursday appeared to be
unaware of the plan. The proposal was signed by Yukos deputy CEO Yury Beilin and head of Yukos' labor union, Alexei
Khamrakulov.
Analysts have long seen the slew of lawsuits against Yukos and Menatep owners Mikhail Khodorkovsky and Platon Lebedev
as aimed at pushing them out of the company to make way for owners more loyal to the state.
The riches Khodorkovsky reaped as Yukos' main beneficiary owner were beginning to pose a threat to Putin.
Moreover, as Russia's wealthiest man, Khodorkovsky was pursuing policies with Yukos -- such as his bid for
privately owned pipelines -- that could undermine Putin's hold on power.
On Thursday it remained unclear, however, whether the Menatep shareholders were ready to let go.
As Khodorkovsky and Lebedev faced trial for the first time together Wednesday in a separate fraud and tax evasion
case, another Menatep shareholder, Vasily Shakhnovsky, said the group was ready for talks with the government.
A spokesman for Menatep said the group was ready to issue guarantees for the $3.4 billion tax bill, and another
source close to Menatep said the shareholders could offer their Yukos holdings as guarantees.
The Yukos source warned that if no deal was struck, "there could be an uncontrollable situation."
He said a court ruling calling for payment of the $3.4 billion tax bill could trigger a chain reaction leading to the
company's collapse. Yukos has said it does not have the funds to immediately pay the bill.
The arrival of bailiffs pressing for immediate payment would lead to a mass sell-off of Yukos shares, the calling-in
of $2.6 billion in international loans, and a cash squeeze so tight that the company might not be able to make advance
payments to pipeline operator Transneft or make electricity payments, the source said.
"If this happens, we will have to close down production," he said.
Analysts said Thursday that Putin's comments appeared to make that doomsday scenario less likely. They predicted
Putin's remarks could influence the court to make a ruling giving more time for Yukos to find ways to pay.
"It is extraordinarily significant that Putin chose to make a statement," said Roland Nash, chief
strategist at Renaissance Capital. "Group Menatep could end up without control over the company. We haven't
found out how it's going to work yet. But I don't think Putin would go out and say something unless there was
a detailed plan in place."
But other experts said the market surge was overly optimistic. They said Putin's comments were a clever ploy
aimed at showing he was above involvement in attacking a company, that if bankrupted, analysts say, would destroy
Russia's investment reputation.
"I would not see this statement as an irrevocable sign that Yukos will not go south," said James Fenkner,
head of research at Troika Dialog. "Putin's an extremely clever guy. All he's saying is, 'I
don't want bankruptcy, but really we live under the rule of law and this is in the hands of the
courts.'"
"Tomorrow is still a big day," he added.
Earlier Thursday, Robert Amsterdam and Sanford M. Saunders of Greenburg Traurig, who represent Khodorkovsky, Lebedev
and Menatep, said a team of international lawyers could sue the government in international courts for illegal
expropriation of assets if the company is bankrupted.
.TX-..**********************************************
[The Moscow Times] |
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