Yukos teetering as banks call in debts

Yukos, the Russian oil giant, today lurched closer to bankruptcy as a group of creditors declared the company in default on $1bn (?545.7m) of loans.

The notification came from a syndicate of banks, led by France's Soci?t? G?n?rale, that had lent Yukos the money in September, the company said. Alexander Shadrin, a Yukos spokesman, told the Interfax news agency that the company received the notification on Friday evening demanding that it quickly clear the debt.

"On July 2, we received the default notice from the banks which helped us organise the $1bn loan," Mr Shadrin told Reuters.

The news pushed Yukos shares sharply lower again as they opened down 13% at 180 roubles. One of Russia's leading brokerages, UFG, said it was suspending ratings and financial forecasts for the beleaguered oil company after the latest events.

The default announcement followed an eight-hour raid on the company's Moscow headquarters on Saturday, during which tax police seized documents, computer discs and safes, and came days before a deadline for payment of a $3.4bn tax bill the firm says it cannot meet.

Yukos has until Wednesday evening to pay the $3.4bn tax bill for 2000, but with its bank accounts frozen, the company cannot even sell off assets to meet the tax demands. Yukos faces a further claim for the same amount for 2001.

The pressure on Yukos is widely seen as politically motivated in a show of Kremlin displeasure at the political ambitions of key shareholder Mikhail Khodorkovsky, who is on trial for fraud and tax evasion.

Vladimir Putin, the Russian president, said last month the government was not interested in seeing Yukos driven into bankruptcy. But there is speculation that the company's only chance for survival is for Mr Khodorkovsky and other key shareholders to relinquish their shares.

Mr Khodorkovsky and his associate, Platon Lebedev, are in jail, facing charges of fraud and tax evasion. Many believe that the outcome of their case will depend on their willingness to make a deal with the government over control of Yukos, which had been one of Russia's most strategically important companies. Yukos pumps around a fifth of Russia's total oil production.

Despite the company's problems, Merrill Lynch upgraded Yukos to "buy" from "neutral" on Monday, with a 12-month price target of $9, saying it saw Yukos as a going concern, even though it faces huge tax bills.

"Now as the affair draws to its conclusion the call is simple: either Yukos remains an ongoing concern (and we value the shares under several options) or it goes bust. We view the latter as highly improbable," Merrill Lynch said. "We believe the Yukos case is heading to its resolution at full steam. Hence, even if the share price experiences a further drop, this should be very short-lived."