06 October 2004

As If It Really Matters

Copied below in its entirety is a research piece from UFG (40% owned by Deutsche Bank) on the legal games being played around Yukos. What murder being a sell-side analyst trying to paint a positive picture of what is clearly a mess;

An article in today's Vedomosti draws attention to speculation in the market about the possibility of Yuganskneftegaz passing automatically into state property. Such speculation should not be taken seriously in our view. Unless you should want us to pay us to short the stock - unfortunately you are likely to be using RenCap to do that.

The grounds for this scare are a provision in the relevant law (the Law on Enforcement Proceedings) that if an asset selected for the purpose of debt recovery has not been sold by the selling agent two months after being frozen, the creditor has the right to simply keep the asset in question. Yukos' 100% stake in Yugansk was first frozen on 14 July. A court decision of 6 August released the asset from the freeze, which was then re-imposed on 9 August by another court decision (procedurally dubious, as it turned out, but such details have long since ceased to matter). It follows that the two-month deadline expires next Saturday. We are quoting the law in the off chance that it makes a difference - we know it doesn't and our last sentence shows as much but we are like lawyers and paid by the word.

Our discussions with legal practitioners in the debt recovery field suggest that the standard practical application of the law is that the two month period begins from the moment the bailiffs hand an asset over to the selling agent. That moment has been on hold for weeks while DKW has been valuing Yugansk. Actually what our legal advisors said was; this is the law but given that the President couldn't give a damn for the constitution you might as well vote for the democrats in Florida.

Secondly, if the tax authorities did claim a right to appropriate Yugansk under the two-month rule, this would contradict another law - namely, the Tax Code, which states that tax liabilities (which is, of course, the nature of the debt being recovered) can only be settled in cash. As if they think that the law applies to them. A real estate report in the English language Moscow Times today reports that the most attractive Moscow real estate is owned by Government employees. Try this maths. "Golden Mile" real estate $5-7/km2, suburb real estate $500k-1.5mn. Average salary of government officials $100 - $2k month ($k applications are correct.)

On this basis alone, the authorities can be expected to at least proceed with the planned sale of Yugansk, rather than short-cut the whole process in what would be a scandal to put the whole of the Yukos affair to date into the shade. In any case, the law simply states that the creditor "can" appropriate the unsold asset as such. It does not oblige the creditor to do so. Apparently we can still be shocked by the application of power (sorry the law) in the Yukos affair.

No comments:

06 October 2004

As If It Really Matters

Copied below in its entirety is a research piece from UFG (40% owned by Deutsche Bank) on the legal games being played around Yukos. What murder being a sell-side analyst trying to paint a positive picture of what is clearly a mess;

An article in today's Vedomosti draws attention to speculation in the market about the possibility of Yuganskneftegaz passing automatically into state property. Such speculation should not be taken seriously in our view. Unless you should want us to pay us to short the stock - unfortunately you are likely to be using RenCap to do that.

The grounds for this scare are a provision in the relevant law (the Law on Enforcement Proceedings) that if an asset selected for the purpose of debt recovery has not been sold by the selling agent two months after being frozen, the creditor has the right to simply keep the asset in question. Yukos' 100% stake in Yugansk was first frozen on 14 July. A court decision of 6 August released the asset from the freeze, which was then re-imposed on 9 August by another court decision (procedurally dubious, as it turned out, but such details have long since ceased to matter). It follows that the two-month deadline expires next Saturday. We are quoting the law in the off chance that it makes a difference - we know it doesn't and our last sentence shows as much but we are like lawyers and paid by the word.

Our discussions with legal practitioners in the debt recovery field suggest that the standard practical application of the law is that the two month period begins from the moment the bailiffs hand an asset over to the selling agent. That moment has been on hold for weeks while DKW has been valuing Yugansk. Actually what our legal advisors said was; this is the law but given that the President couldn't give a damn for the constitution you might as well vote for the democrats in Florida.

Secondly, if the tax authorities did claim a right to appropriate Yugansk under the two-month rule, this would contradict another law - namely, the Tax Code, which states that tax liabilities (which is, of course, the nature of the debt being recovered) can only be settled in cash. As if they think that the law applies to them. A real estate report in the English language Moscow Times today reports that the most attractive Moscow real estate is owned by Government employees. Try this maths. "Golden Mile" real estate $5-7/km2, suburb real estate $500k-1.5mn. Average salary of government officials $100 - $2k month ($k applications are correct.)

On this basis alone, the authorities can be expected to at least proceed with the planned sale of Yugansk, rather than short-cut the whole process in what would be a scandal to put the whole of the Yukos affair to date into the shade. In any case, the law simply states that the creditor "can" appropriate the unsold asset as such. It does not oblige the creditor to do so. Apparently we can still be shocked by the application of power (sorry the law) in the Yukos affair.

No comments: