Related News

The Yukos saga continues, as one observer on the case comments to GTR. He says that contrary to some press reports (eg Moscow Times 13/1/06), the Moscow Federal Arbitrazh court did not speed up procedures to accept the bankruptcy papers filed by the western banks: papers were filed on March 6 and the court took the usual five days before accepting them.

Also contrary to some press reports, he adds, the western banks do not enjoy a priority claim over the offshore assets of Yukos thanks to proceedings in the Dutch courts. The Dutch incorporated intermediary holding companies of Yukos are just that – holding companies. The western banks’ loan was to oil company Yukos itself.

“While the banks have been able to get an attachment over Yukos’s shares of the holding companies, they are prevented by law from reaching the underlying assets,” our insiders states. “The banks have no claim on assets like Mazekhiu or Transpetrol, which are held by the intermediary Dutch holding companies. Worse, even if by exercise of the attachment, the banks took control of the holding companies, they would still not control the assets because of a Dutch Law poison pill defence used by Yukos involving a ‘Stichting’ or trust, which has beneficial control over these assets irrespective of what happens at holding company level.”

Officers of the Stichting are all senior Yukos managers and Menatep representatives, including Bruce Misamore (despite having resigned as CFO of Yukos itself) and Tim Osborne, the managing director of Group Menatep Ltd. Liquidation of the offshore assets is only of benefit to the banks if the Stichting decides to pass the proceeds upstream to the Yukos holding companies as dividend, which to date they have declined to promise.

“The sale proceeds of Transpetrol for example, cited by Yukos in the press on Friday, March 10, as bringing in US$400mn+ did not take this route and so far as the western banks are concerned these funds simply disappeared,” says our source. “Even more entertaining is that thanks to a parallel loan by Menatep to Yukos, with the same security structure, Menatep is also suing Yukos through the Dutch courts (in fact they led the way to the banks who had not previously tried this route), and so are fully informed by the Dutch court of exactly the current state of play in the banks’ actions. Should, by some miracle, the banks actually manage to trap some cash through the Dutch legal process, they would be bound by the Dutch court to share it pari passu with Menatep!”

Yukos is also reported in The Wall Street Journal as saying that it had settled with the banks in a Dutch court. “As a matter of record there has been no settlement,” claims our insider.

The Wall Street Journal also reported that the Yukos loan was secured on export revenues of Yuganskneftegas (YNG). This also is some distance from the truth, claims our man. “As per the English court papers it was secured on export revenues of Yukos itself and lenders say they were in fact not permitted to know where the oil came from,” he says. “The link to YNG came later from suretyships (offered by Yukos as another poison pill defence against breakup of the company), which were entered into by all production units. Rump-Yukos continues to export, but just doesn’t deliver under the contract that was assigned to the western bank group. Yukos used the loss of YNG in December 2004 to declare force majeure on the contracts which secured the western lenders, since when the only voluntary payment made was when they were faced with court action in the US to seize the funds they’d pledged to the Texas courts (the ‘Texas Monies”).”




Yukos itself filed for bankruptcy and bankruptcy protection in the US in December 2004. It pledged US$50mn into the US court to cover the proceedings and help prove it had US assets. The US filing failed and by April the following year they were asking for the court to release what funds were left back to the company.

The western banks were informed under court rules, and decided to seek enforcement in the US of their English High Court ruling against Yukos, meanwhile applying to the court to block the release of funds.

Legal commentators (presumably also the legal advice for Yukos) opined overwhelmingly that the US court should uphold the English court judgement against Yukos, based on the simple fact Yukos was in default under the loan (whether or not this was the fault of the Russian government, as claimed by Yukos, was of limited concern to the banks who were simply not getting paid).

Yukos was faced with having its US accounts frozen. It offered to make a ‘voluntary payment’ of what was left of the funds, provided the banks dropped the US action and didn’t freeze the accounts, otherwise it threatened to fight the US enforcement to the full limit allowed by law.

“Bearing in mind the burn rate of the top tier US legal team such as employed by Yukos had already in four months been able to reduce the $50mn at stake to around US$20mn, banks decided that this was an acceptable offer or they would be fighting to get nothing at all,” says the source. “In the end, net of further US legal fees incurred in Texas by Yukos, the banks were paid just over US$17mn (according to papers filed in the Dutch  courts in July 2005).”