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Wrap: Yukos looks to Gazprom, Rosneft as bankruptcy looms

MOSCOW, June 21 (RIA Novosti) - Yukos, once Russia's leading independent oil company, has been forced to look toward state-owned energy companies Gazprom and Rosneft as it teeters on the brink of bankruptcy.

At a shareholders' meeting on Wednesday, Viktor Gerashchenko, the chairman of the board and one-time Central Bank of Russia chief, said the crippled concern could become a subsidiary of oil company Rosneft and was considering selling a 20% stake in what was once Sibneft to energy giant Gazprom.

Although he said the company's huge debts had been substantially reduced and its American chief executive would stay on, Gerashchenko said Rosneft could continue its long march of buying up assets.

"The most sensible option would be if Rosneft bought Yukos and Yukos became a Rosneft subsidiary," he told journalists during a break in proceedings at the meeting.

The state-run company took control of Yukos's prize production asset, Yuganskneftegaz, after an auction in December 2004 and only yesterday signed a deal with Sinopec Group in China, which was once a prime export destination for Yukos, to finance a deal to buy a 51% stake in a regional Russian producer.

With founder Mikhail Khodorkovsky serving an eight-tear prison sentence and the company still facing massive debts and tax arrears, Gerashchenko said Yukos was also considering selling its 20% stake in what once was Sibneft to Gazprom.

This would give the energy giant complete control of tycoon Roman Abramovich's former company after it bought more than 75% of Sibneft stock last year and renamed the company Gazprom Neft in May.

"We have had preliminary contacts with Gazprom on the sale of [our] Sibneft shares but they have failed to produce any results yet," Gerashchenko said.

Alexander Ryazanov, Gazprom's deputy chief executive and head of Gazprom Neft, said earlier his company was interested in buying the Yukos stake.

In another blow to the embattled company, an auditor's report cited at the meeting said Yukos's accounts for 2005 failed to reflect the company's real financial standing.

Horwath ICLC, a Russian company and a member of the international audit and consulting group Horwath International, said that its findings indicated that the company's financial statements did not give an adequate picture of its financial situation as of December 31, 2005 and the results of its financial activities in the period from January 1 to December 31, 2005 and could not be recognized as corresponding to Russian requirements for financial statements.

The auditor said the value of Yukos' net assets reported as of December 31, 2005 and December 31, 2005 was below the minimum required for charter capitals, which could serve as grounds for liquidating the company.

Yukos is currently run by an external administrator and faces bankruptcy hearings starting June 27 with Rosneft, which secured the right to claim the debt from a syndicate of foreign banks led by Paris-based Societe General SA, acting as a claimant.

The consortium originally sought Yukos' bankruptcy after the company defaulted on part of a $1-billion syndicated loan arranged three years ago by Societe Generale SA with Deutsche Bank AG, Citigroup Inc. and HSBC PLC. The banks sold their remaining $482-million debt on March 13 to Rosneft, which asked the Moscow Arbitration Court on March 28 to recognize Yukos as bankrupt and appoint an external management of the company.

In mid-April, the interim receiver appointed by the court filed for Chapter 15 bankruptcy in a New York court to stop the embattled oil company's managers from selling assets.

Papers filed by Edward Rebgun said attempts by three U.S.-based Yukos managers to sell a 53.72% stake in Lithuanian refinery Mazeikiu Nafta showed "blatant disregard of the injunctive relief order," violated Russia's law on insolvency, and "puts creditors of the company at risk."

Gerashchenko told an annual shareholders' meeting that the tax claims to the company had totaled $27.5 billion in the past four years.

"A part of this debt has been reduced due to the sale of Yuganskneftegaz and the remaining tax bill stood at $6.5 billion as of early 2006," Gerashchenko said.

He said the company, which is attempting to stave off bankruptcy, had also cut its tax bill through its earnings.

He also said 54-year-old Steven Theede, Yukos chief executive since 2004, was not about to step down. The shareholders meeting reelected him to his post.

"As far as I know he is not planning to resign," Gerashchenko said, though he added that it was hard to run the business from London, where many executives have set up their base fearing they might face legal difficulties if they returned to Russia.

However, a court will hear an appeal on July 6 against Theede's appointment after shareholder Valery Barmin filed motion in April, arguing that it was unlawful to put a foreign national in charge of a domestic company.

Yukos lawyers maintain the current chief executive was appointed in full compliance with the corporate charter.

In a further indication of the company's financial troubles, Yukos decided against paying dividends for 2005.

Shareholders decided against dividend payment because Yukos' net loss totaled 95 billion rubles ($3.3 billion) in 2005 even though this was a marked improvement on the 417.48 billion rubles ($14.5 billion) in 2004.

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