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Sibir shares suspended after loan admission

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By Ed Crooks and Catherine Belton

Published: February 20 2009 02:00 | Last updated: February 20 2009 02:00

Shares in Sibir Energy, the London-listed oil company with assets in Russia, were suspended yesterday after the company revealed that it had lent $325m (£228m) to one of its shareholders.

In a statement, Sibir admitted that Chalva Tchigirinski, a Russian tycoon who owns about 23 per cent of the shares, owed the company $210m more than the $115m that it had previously acknowledged.

Sibir is listed on Aim, the exchange for smaller companies that is more lightly regulated than London’s main market. At the latest share price of 174¾p, down 69 per cent in the past six months, its market capitalisation was £676m.

Steven Dashevsky, head of research at UniCredit in Moscow, described the news as “a disaster”, adding: “It reminds people that the corporate governance risk in Russia is very much alive.”

Sibir gave no indication of when the shares might return from suspension, but said it would make a full statement “detailing all the facts and circumstances . . . as soon as possible”.

That statement will also give an assessment of how likely it is that the company can get its money back.

Mr Tchigirinski has agreed to pay off his creditors by selling his private aircraft and homes in France and England.

Sibir said its board would be investigating “in conjunction with the major Russian shareholders”, who include Mr Tchigirinski, Igor Kesaev, another businessman who owns a further 23 per cent, and the city of Moscow, which has 18 per cent.

Strand Partners, the London-based corporate finance firm that is Sibir’s nominated adviser and as such responsible for the company’s complying with regulatory requirements, discovered the $325m loan to Mr Tchigirinski late on Wednesday, the statement said.

Sibir has had great success in developing its Salym oil fields in western Siberia, a 50-50 joint venture with Royal Dutch Shell, which came on stream at the end of 2005. Last month, the field celebrated record production, with Sibir’s share running at more than 80,000 barrels per day.

But that success has been eclipsed by the turbulence in the company’s relationship with Mr Tchigirinski.

Last October, Sibir said it had lent $115m to Mr Tchigirinski as an advanced payment for his Sovetsky Hotel in Moscow and another property in the city.

In December, it revealed that it planned to buy a much bigger portfolio of properties from him, to help him cut his borrowings and prevent him being forced to sell his stake in Sibir.

At the time, Sibir’s board led by William Guinness, chairman, and Henry Cameron, chief executive, defended the proposed deal on the grounds that Mr Tchigirinski played a “crucial role” as a shareholder in securing the company’s position in Russia, a country that has proved very difficult for many foreign oil companies. As Mr Cameron put it: “Difficult times call for uncomfortable decisions.”

Last month, however, that plan was abandoned, after the Russian shareholders said they would not back it.

The most recent plan, set out on February 11, was for Mr Tchigirinski to pay back Sibir’s $115m and a further $192m owed to Mr Kesaev by selling properties and his private aircraft.

It committed Mr Tchigirinski to paying off the debts “as soon as reasonably practicable and in any event within a period of 270 days from 15 January 2009,” and pledged property in France and England as security.

The revelation that the debt is actually much larger than previously thought will, however, raise questions about Sibir’s finances.

The company’s net debt was $278m last June. In the first six months of last year it generated just $1.9m of cash from operations.

At the end of last year it sold a 25 per cent stake in BP-branded petrol stations in and around Moscow to TNK-BP, BP’s Russian joint venture, for $153m.

Viktor Myshnyakov, an energy analyst at Uralsib investment bank in Moscow, said Russian companies such as GazpromNeft, the oil arm of state-controlled Gazprom, or Surgutneftegaz, the Kremlin-friendly oil group, could be interested in buying out Mr Tchigirinski and Mr Kesaev’s holding.

He said these companies were eyeing the Salym field, which was “the biggest, fastest-growing greenfield [oil development] in Russia”.

Shell has also been rumoured as being interested in taking a stake or bidding for Sibir.

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