Last week, as Mikhail Khodorkovsky languished in an icy labour camp on the Chinese border, his beleagured oil firm Yukos was almost certain to be officially declared bankrupt:
A Russian court will now have to rule on whether to declare it officially bankrupt and will decide on the sale of its assets to pay back creditors.
Interfax reported that [court-appointed administrator Eduard] Rebgun spoke to a meeting of Yukos creditors and told them that the company’s debts amount to $18.26 billion while its assets are worth only $17.72 billion, making the company insolvent.
An open and shut case then: the company’s debts are greater than the valuation of the company itself, and therefore it is bankrupt. Right? Erm, not quite. Things are a little more murky than that:
The estimation of the asset value is in sharpcontrast even with cautious assessments by analysts in Moscow, most of whom are doing whatever they can to prop up the attractiveness of the falling Russian stock market.
Analysts said that the remaining Yukos assets may be worth between $25 billion and $35 billion, given they include two large oil producing units and five oil refineries, which process 16% of Russia’s domestically used oil.
Also, Yukos still retains a 23% stake in Yuganskneftegaz. Rosneft’s recent IPO in London valued the company at more than $72 billion.
As Yuganskneftegaz makes up 70% of Rosneft’s total production, the implied market value of the oil unit may be assessed at about $50 billion, if not more.
This would value Yukos’ 23% stake at about $11.5 billion, well ahead even of its own assessment of $10.4 billion.
…
But even here, Rosneft’s representatives shamelessly said at the creditors’ meeting that the Yugansk stake should not be valued at more than $3.5 billion.
So Yukos is valued anywhere between $17.7bn and $35bn, depending on whom you believe. Yukos’ debts stand at $18.26bn, meaning that the company is only technically insolvent if the lowest figure is taken as correct. Unsurprisingly, this figure is the one adopted by the judges who have just declared Yukos bankrupt.
Equally unsurprisingly, this has left a nasty taste in some people’s mouths, not least those who invested heavily in Yukos and have now lost everything. Yukos’ remaining assets will likely be swallowed up by state energy companies Gazprom and Rosneft, the latter already having bought Yukos’ main subsidiary Yuganskneftegaz via a dodgy auction last year. Despite the best efforts of the Russian government to make these rulings appear to be fair and balanced, the whole affair smacks of the enforced bankrupcies and rigged auctions of the mid-90s which saw vast swathes of the Ural’s heavy industry land in the laps of Yekaterinburg’s mobsters-stroke-politicians.
The irony that this comes just weeks after Rosneft’s IPO, a showcase event which attempted (with mixed success) to present the Russian oil business in a favourable light to foreign investors, has not been lost on the editorial team of Upstream Online:
Russia lives in two different worlds today: a shining one that international rating agencies like to upgrade and investment analysts to promote, and a hidden and dirty one, which every wise foreigner ought to avoid.
Only time will tell which world will prevail.
