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Tuesday, May 06, 2008

YUKOS fate looming over RussNeft

//New tax claims could render the company bankrupt
05-05-2008 - RBC News - The same fate as YUKOS's may be awaiting RussNeft, if the company is faced with RUB 18bn – RUB 20bn (approx. USD 758m – USD 842m) in back tax claims for 2006. According to a Reuters source familiar with the audit results conducted by the Federal Tax Service early this year, that is the amount, including fines and penalties, that the fiscal authorities are likely to voice. Experts do not rule out the scenario where the company would go bankrupt, assuming that its assets would be scooped up in auction by Rosneft and Gazprom Neft, unless Oleg Deripaska's affiliates manage to reach a deal with the tax collectors or lend RussNeft the needed sum to pay the back tax. An RBC Daily source close to RussNeft confirmed to the newspaper that a tax audit of the oil company's 2006 results took place at the beginning of the year, but said he was not familiar with its results, as a statement had not yet been received from the tax authorities. A possibility is not ruled out that the claims relate to RussNeft reducing its tax burden by purchasing oil from its subsidiaries at a premium through trading firms. It has been a year since the company has stopped using that scheme, but such practice was still in place in 2006. RussNeft is currently appealing against similar tax claims of RUB 20.5bn (approx. USD 863m) for 2003-2005 in the Supreme Arbitration Court. If RussNeft does not succeed in disputing the earlier claims and receives new ones to top those, it will not be able to pay its debts, with the bankruptcy threat looming. According to the company's financial statement for the fourth quarter of 2007, its net loss amounted to RUB 16.7bn (approx. USD 703m), and its debt burden stood at RUB 32.58bn (approx. USD 1.37bn) and roughly USD 1.9bn. Although the company posted a RUB 3.5bn (approx. USD 147m) net profit in Q1 2008, this is clearly not enough to pay back all the tax and other debt. The potential bidders for RussNeft are Russian businessman Oleg Deripaska's affiliates and the Swiss trader Glencore. The latter, on a par with Sberbank, is the oil company's major creditor. However, the Federal Anti-Monopoly Service (FAS) has not yet given its green light to close the deal. Igor Sechin and Rosneft affiliates have also been named among those showing interest in the asset. According to unconfirmed data, Deripaska has already paid the former owner of RussNeft, Mikhail Gutseriyev, who is currently on both the federal and international wanted lists for tax crimes. The amount of the deal varies between USD 3bn and USD 3.5bn, plus the obligation to pay off any subsequent back taxes. The businessman himself has not confirmed this information. A lawyer who took part in YUKOS receivership has indicated that RussNeft had at least three possible scenarios if charged with new tax claims. Firstly, its governing body could apply for bankruptcy in order to have the opportunity be the one to appoint a trustee in bankruptcy. If RussNeft should dispute back taxes and the court not rule in its favor, it will be up to the company's creditors to appoint a receiver. Secondly, a third party (such as Oleg Deripaska's affiliates, if such were the terms of the deal) could lend the company the needed money under a loan agreement. And thirdly, a third party could buy RussNeft's shares from the asset's current owner or provide funds against these securities. Sberbank currently holds the company's shares as security for its loans. Mikhail Krutikhin, a partner at the RusEnergy consultancy firm, believes that RussNeft's bankruptcy is quite possible. In his opinion, Rosneft and Gazprom Neft could be interested in acquiring its assets in auctions after all the encumbrances have been lifted. However, he was unable to say if Oleg Deripaska's affiliates would also compete for the asset. Nikolai Manvelov, a spokesperson for Rosneft, told RBC Daily that the company would not be interested in acquiring RussNeft at the moment, but that the the state company's investment committee would consider the feasibility of participating in auctions when they are announced. A source close to Oleg Deripaska is convinced that RussNeft was acquired by this oligarch's affiliates and the deal paid for, despite the fact that formally it cannot yet be closed without the approval of the Federal Anti-Monopoly Service. He believes that Deripaska can settle all the problems with the fiscal authorities without having to pay a premium for the asset. “Oleg will not be able to retreat. That would be showing a sign of weakness,” the businessman thinks. Basic Element representative Pyotr Lidov said he would not comment on rumors. A representative of the concerned Federal Tax Service directorate declined to comment. A source close to RussNeft did not rule out the possibility that the fiscal authorities would in the end decide to wait until the Supreme Arbitration Court ruling on the appeal against previous back tax claims, before charging the company with new ones. The spokesperson indicated that a decision to “sell the company peacefully” to Oleg Deripaska's affiliates and Glencore had been passed “behind the Kremlin walls,” and, if that were true, it was not likely that the tax authorities would make a “second YUKOS” out of RussNeft. RussNeft declined to comment.

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