International creditors declared the beleaguered Yukos Oil Co. in default on a $1 billion loan, the firm announced Monday, propelling Russia's biggest oil producer closer to the edge of financial collapse.
The lenders moved to protect their interests as the Russian government pressed the oil firm to begin paying the first half of nearly $7 billion in back taxes. The default notice means the loan is due immediately, but the government has frozen Yukos bank accounts and assets, so it cannot pay.
The latest blow to Yukos left executives scrambling to find a way to keep its oil wells pumping and avoid bankruptcy, but analysts said the firm appeared increasingly likely to declare insolvency within days. A Moscow court has given the company until Wednesday to come up with the first $3.4 billion in back taxes, but Yukos has said it does not have enough cash and cannot sell property to raise the funds because of the court-ordered asset freeze.
"Actions of representatives of the Russian government have led Russia's best and most creditworthy company to the brink of an unintended and artificial situation of insolvency and possible bankruptcy," Yukos chief financial officer Bruce Misamore said in a statement.
The situation endangers a company that pumps more oil than Libya and accounts for one-fifth of foreign petroleum sales by Russia, the world's second-largest oil exporter. The latest figures published by brokerage houses Monday showed that Yukos produces 1.7 million barrels a day, surpassing its own records and every other Russian oil company.
The only hope for the company, according to some analysts, is a last-minute intervention by President Vladimir Putin, who said last month that he was "not interested" in a Yukos bankruptcy. But since then, Putin's government has shown no willingness to negotiate and instead seems eager to escalate the attack on Yukos. Dozens of law enforcement agents raided the company's headquarters on Saturday and took away documents and computer hard drives.
"The situation is not completely hopeless but not very positive either," said Mikhail Delyagin, an economist and former adviser to Putin's first prime minister. "This has been a political conflict from the very beginning.
Yukos, which has already lost more than $20 billion in market value since its troubles intensified last fall, saw its stock slide even further Monday, by 4 percent on the RTS index and 10 percent on the ruble-denominated MICEX index. With its bank accounts frozen, the company has warned it may have to start shutting down production soon. Monday, it said it would be able to continue production until the end of the month.
"We're like in a war now," said Yukos spokesman Alexander Shadrin. "Bankruptcy is getting closer and closer despite all the statements of government officials saying they don't want bankruptcy." Shadrin declined to predict when that might occur.
Yukos has been under fire from the government for a year, caught up in a struggle between its chief shareholder, Mikhail Khodorkovsky, and the Kremlin. Khodorkovsky, who infuriated Putin's circle with his political activities, was arrested last October and remains imprisoned awaiting trial on fraud and tax evasion charges.
After his arrest, the company was hit with a $3.4 billion bill for back taxes, penalties and interest from 2000 based on a re-audit and a new interpretation of tax-shelter laws. Last week the government announced it would charge Yukos another $3.4 billion for 2001, a demand that authorities formally delivered on Monday. The company expects more bills to come for 2002 and 2003, which could bring the total government demands to $10 billion; the company is worth about $14 billion.
The loan default notice was sent Friday by a group of banks led by Societe Generale just days after a Moscow court upheld the first of the two tax bills. The notice asserted the lenders' right to call the loan immediately, but the banks did not demand instant payment and said they wanted to help Yukos find a way to avoid bankruptcy. Yukos, which disclosed the notice Monday, said it plans to negotiate with the lenders in hopes of preserving the company.
The oil firm's other major loan, totaling $1.6 billion, is secured by Group Menatep, the parent company headed by Khodorkovsky, which said Monday that it did not want to bankrupt Yukos.