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YUKOS Assets to Become German

by Dmitry Butrin and Denis Rebrov

Deutsche Bank is ready to redeem YUKOS’s debts to Gazprom’s benefit
YUKOS chairman of board Viktor Gerashchenko told Kommersant that Deutsche Bank is in talks about redeeming debts and buying the controlling stock of YUKOS. If Deutsche Bank manages to carry this out, it will have in its hands the fate of the major current corporation conflict in Russia’s economy – that of Gazprom and Rosneft.

Two independent sources in the investment banking sphere told Kommersant last week that Deutsche Bank and its Russian subsidiary Deutsche UFG are interested in YUKOS assets. YUKOS chairman of board Viktor Gerashchenko confirmed the information in his interview to Kommersant yesterday. He said that last week he received a letter signed by Ilya Shcherbovich, head of the bank’s subsidiary in Russia Deutsche UFG. The letter said that the bank is interested in purchasing “YUKOS’s controlling stock” and “is ready to undertake” redeeming the company’s debts.

Deutsche Bank and Deutsche UFG refrained from giving comments on Sunday. YUKOS says nothing about the situation either. Nikolai Lashkevich, spokesman for YUKOS bankruptcy commissioner Eduard Rebgun, said the commissioner’s office does not know anything about the offer. However, Kommersant’s sources in investment banking say off-the-record that Deutsche UFG offered to purchase YUKOS assets back in early summer 2006, but nothing was know about any specific steps to carry out this idea.

Viktor Gerashchenko said he does not know on whose behalf Deutsche Bank acts. “We suggested they address Group MENATEP director Tim Osborne, and gave all his contacts to them. I do not know whether any talks were held. Yet, amicable agreement is always possible,” said Gerashchenko.

It is unlikely that Deutsche Bank acts on behalf of Rosneft, YUKOS’s main creditor, and claimant #1 for controlling the company’s assets. According to the list of YUKOS creditors as of October 12, there are 37 creditors claiming debts of 586.6 billion rubles. The major private creditors are Yuganskneftegaz controlled by Rosneft (109 billion rubles), and Rosneft itself (some 150 billion rubles). The main state creditor is the Federal Tax Service. YUKOS owes 311.7 billion to it. Thus, Rosneft would hardly have been interested in buying out YUKOS’s debts via Deutsche Bank. YUKOS refrained from comments on Deutsche Bank’s attention to the company.

Gazprom spokesman Sergey Kupriyanov refused to discuss Deutsche Bank’s initiatives with Kommersant yesterday. Yet, unlike Rosneft, Gazprom seems to be the most likely client of Deutsche Bank in those talks. Gazprom chairman Alexey Miller met with Deutsche Bank chairman Josef Ackermann on October 9, unexpectedly raising the question of the advanced repayment of Gazprom’s credits attracted with the participation of Deutsche Bank. It is common practice to restructure the portfolio before large deals. Besides, Miller and Ackermann were discussing the issues of financing Gazprom’s acquisition deals.

Deutsche Bank has been Gazprom’s official strategy advisor since 2004. It consulted Gazprom in 2 major deals – when selling 10.74 percent of the company to Rosneftegaz, and as the author of the so-called fairness opinion when buying Sibneft. Deutsche Bank board member Tessen von Heydebreck, who is in Russia now, will take part in the advisory council on foreign investment with Russian Prime Minister Mikhail Fradkov today.

Investment analysts say that both Gazprom and Rosneft have reasons to buy YUKOS’s controlling stock and avoid the company’s sell-out by redeeming its debts. “The only 2 companies which could have made this offer are Rosneft and Gazprom,” said Moscow Bank analyst Vladimir Vedeneev. “Rosneft will have difficulty digesting a deal like that, while for Gazprom this deal is not crucial. If, however, YUKOS is sold out at an auction, Rosneft’s position is better then.” At the same time, the expert believes the talks with Group MENATEP will hardly end successfully.

Thus, if Deutsche Bank does act on Gazprom’s behalf, it is in the middle of the key conflict in Russia’s economy of 2007 – the strategic competition between Gazprom and Rosneft for oil assets in Russia and the influence in the top-bracket of political power.


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