Yukos appeals to government to prevent bankruptcy

In its press-release circulated Thursday at a press-conference, the YUKOS management has again appealed to the government to discuss ways of preventing the company's bankruptcy. It has also placed its proposals with the Justice Ministry, the bailiff office, the federal property management agency and corresponding ministries.

"We have appealed to continue discussing ways of preventing YUKOS bankruptcy by restructuring its tax arrears and withstanding from actual confiscation of its production assets," says the press-release.

"YUKOS is confident that making bankrupt one of the country's leading and most effective companies does not answer national economic interests," continues the press-release.

"YUKOS wants to confirm that the company has always acted in accordance with tax legislation in effect and norms of business practice but reaffirms that as a law-abiding company it will continue performing the decision of the Court of Arbitration, that has come into force, on levying 99,400 million roubles ($3.4 billion) worth of taxes, penalties and fines for 2000. The company also reiterates its disagreement with the extra charges and will keep challenging their validity in the established legal order," says the press-release.

With the current prices for oil and oil products, the company's average monthly receipts make about $1.8 billion and total payments in accordance with routine activities in July should stand at $1.7 billion. Similar receipts and payments are forecast for this August, says the appeal.

About $900 million replenish the blocked accounts monthly. "These funds are likely to be written off to make up for the YUKOS tax debt," says the appeal. Thus, forced to make payments to the tune of $1.7 billion in July and August, the company is denied access to half of the expected monetary receipts and is faced with the prospect of exhausting its previously available funds for settling this deficit.

YUKOS has already repaid about $300 million as part of its 2000 debt at the expense of its current receipts from ongoing operations.

The company is in no position to make borrowings and attract additional funds by selling its arrested assets. YUKOS has got no sufficient monetary reserves to instantly repay its tax arrears in full, says the appeal.

"The company's management is taking efforts to attract additional funds for an early repayment of the tax debt," continues the press-release. "If these efforts remain futile and the Yuganskneftegaz company is sold, the YUKOS management will be compelled to announce soon the bankruptcy of Russia's major oil company."

Yuganskneftegaz sale provided for by the final process will cause a notable reduction of YUKOS monetary inflow. Thus, even if the company succeeds in overcoming the current liquidity crisis, the subsequent sale of the basic extracting asset will force it to announce its bankruptcy and the inability to meet the obligations under export contracts concluded on behalf of YUKOS, says the appeal.

"Meanwhile, the company is capable of repaying the remaining part of the debt within a reasonable time on condition of its retaining the basic production entities and selling other assets with no links to YUKOS basic activities, provided the arrest on them is lifted. Besides, certainty as regards all potential tax claims would enable YUKOS to attract substantial additional finances," goes on the document.

It points out that the sale of Yuganskneftegaz is a violation of Russian Federation law in effect. Thus, the bailiff service produced no argument when denying YUKOS the arrest of assets with little impact on the company's production activity but being able, if sold, to cover the tax arrears for 2000 to the full. Instead, it will be YUKOS's main production asset that will go on sale and which ought under current law to be the last to be marketed.

"The quick sale of Yugansneftegaz at a notably underrated prices will be regarded by YUKOS investors and share-holders as an attempt to initiate deliberate bankruptcy. In this case, YUKOS will view the buyer's activities as conducive to deliberate bankruptcy," says the appeal.

The press-release points out that the choice of Yuganskneftegaz as a priority target for sale is most surprising since the value of this enterprise's reserves alone amounts to $30,400 million, that is almost nine times more than the tax claims for 2000.

YUKOS can't think of any potential buyer capable of acquiring Yugansneftegaz in a short while for a fair market price.

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Author`s name: Editorial Team