Gazprom appeals judge's temporary order in Yukos bankruptcy
12:30 AM
Posted: Sunday, December 19, 2004
HOUSTON (AP) -- Russian state-controlled natural gas giant Gazprom on Saturday appealed a U.S. bankruptcy judge's order that granted oil giant Yukos a temporary injunction halting the auction of its key production subsidiary.
Yukos filed for Chapter 11 bankruptcy Tuesday in Houston. The filing was Yukos' last-ditch effort to block the auction scheduled for Sunday in Moscow, which Gazprom would likely win.
The Russian government planned to sell the subsidiary, Yuganskneftegaz, to pay off some of the $27.5 billion in back taxes it says is owed by Yukos, Russia's largest oil producer.
Judge Nancy Atlas said she hoped to have a decision later Saturday night. "This is somewhere between an $8 billion and $20 billion conversation. I just need to know that I have authority," Atlas said.
Russia had pledged to proceed with the auction, saying the U.S. order is irrelevant on Russian soil. But Gazprom may not be able to pay for the subsidiary because a consortium of Western banks reportedly put on hold billions of dollars in credit it needs for the purchase.
U.S. Bankruptcy Judge Letitia Clark granted Yukos' request Thursday for a temporary restraining order delaying for 10 days the auction of Yuganskneftegaz.
Following that decision, the banks -- including Deutsche Bank, ABN Amro, BNP Paribas, and Dresdner Kleinwort Wasserstein -- froze between $10 billion and $13 billion they had pledged to loan Gazprom for its bid, Russian and other news reports said Friday.
Citing what it called high-ranking Western financial sources, the ITAR-Tass agency reported that the banking group had decided to freeze the deal at least until the U.S. court reaches a final decision.
Hugh Ray, an attorney for Deutsche Bank, said Saturday that the bank had stopped work on the deal. "We are not financing anything. We are not even advising Gazprom on how to bid," he said at a hastily called hearing.
With a big presence in the United States, the banks could potentially face legal action if they violated the court order.
The government put a starting price of $8.6 billion on the auction, far below what Yukos says the unit is worth. The Western Siberian unit pumps 1 million barrels per day, or 60 percent of Yukos' total output.
If Gazprom were to win the auction, it would make it -- and by default, the Russian government -- one of the biggest oil players in Russia virtually overnight.
Michael Goldberg, a Houston attorney for Gazprom, said the temporary injunction is damaging to the company and questioned whether U.S. courts had authority to handle the case.
"The auction -- from everything we've seen, everything we've heard, everything we've seen reported -- is going forward," he said Saturday. "That leaves us absolutely destroyed. It effectively destroys our rights."
Attorneys for Yukos questioned whether Gazprom's appeal was appropriate, arguing that the temporary restraining order could not be appealed.
"They are taking our biggest asset and selling it to their cousin," Yukos attorney Zack Clement said.
The judge asked why Russia would not want to stop the auction.
"It's none of your business, and that's the problem with why it is here," Goldberg answered, questioning the judge's jurisdiction but explaining that he did not mean any disrespect.
He said Gazprom was merely asking for a chance to bid. "If we don't bid, we won't win," he said.
Yukos filed for Chapter 11 bankruptcy Tuesday in Houston. The filing was Yukos' last-ditch effort to block the auction scheduled for Sunday in Moscow, which Gazprom would likely win.
The Russian government planned to sell the subsidiary, Yuganskneftegaz, to pay off some of the $27.5 billion in back taxes it says is owed by Yukos, Russia's largest oil producer.
Judge Nancy Atlas said she hoped to have a decision later Saturday night. "This is somewhere between an $8 billion and $20 billion conversation. I just need to know that I have authority," Atlas said.
Russia had pledged to proceed with the auction, saying the U.S. order is irrelevant on Russian soil. But Gazprom may not be able to pay for the subsidiary because a consortium of Western banks reportedly put on hold billions of dollars in credit it needs for the purchase.
U.S. Bankruptcy Judge Letitia Clark granted Yukos' request Thursday for a temporary restraining order delaying for 10 days the auction of Yuganskneftegaz.
Following that decision, the banks -- including Deutsche Bank, ABN Amro, BNP Paribas, and Dresdner Kleinwort Wasserstein -- froze between $10 billion and $13 billion they had pledged to loan Gazprom for its bid, Russian and other news reports said Friday.
Citing what it called high-ranking Western financial sources, the ITAR-Tass agency reported that the banking group had decided to freeze the deal at least until the U.S. court reaches a final decision.
Hugh Ray, an attorney for Deutsche Bank, said Saturday that the bank had stopped work on the deal. "We are not financing anything. We are not even advising Gazprom on how to bid," he said at a hastily called hearing.
With a big presence in the United States, the banks could potentially face legal action if they violated the court order.
The government put a starting price of $8.6 billion on the auction, far below what Yukos says the unit is worth. The Western Siberian unit pumps 1 million barrels per day, or 60 percent of Yukos' total output.
If Gazprom were to win the auction, it would make it -- and by default, the Russian government -- one of the biggest oil players in Russia virtually overnight.
Michael Goldberg, a Houston attorney for Gazprom, said the temporary injunction is damaging to the company and questioned whether U.S. courts had authority to handle the case.
"The auction -- from everything we've seen, everything we've heard, everything we've seen reported -- is going forward," he said Saturday. "That leaves us absolutely destroyed. It effectively destroys our rights."
Attorneys for Yukos questioned whether Gazprom's appeal was appropriate, arguing that the temporary restraining order could not be appealed.
"They are taking our biggest asset and selling it to their cousin," Yukos attorney Zack Clement said.
The judge asked why Russia would not want to stop the auction.
"It's none of your business, and that's the problem with why it is here," Goldberg answered, questioning the judge's jurisdiction but explaining that he did not mean any disrespect.
He said Gazprom was merely asking for a chance to bid. "If we don't bid, we won't win," he said.
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