Chigirinsky To Sell Real Estate to Pay Debts

LONDON -- Sibir Energy shareholder Shalva Chigirinsky will sell some of his real estate in Russia, France and Britain together with an airplane to repay $307.4 million in debt, the company said Wednesday.

Chigirinsky, who once had a fortune worth $2.5 billion and was the country's 44th-richest man, according to Forbes magazine estimates from April, has a mid-October deadline to repay a debt to Sibir and his partner Igor Kesayev.

Sibir shareholders on Feb. 27 will vote to cancel a plan to buy property from Chigirinsky, who was facing a risk of margin calls from lenders. The company shares jumped 28 percent on Dec. 18 when stockholders postponed a decision on purchasing real estate from the businessman.

Sibir will help to "dispose of the properties in consultation with Mr. Chigirinsky," the company said Wednesday. "The board is satisfied that the full amount of the" debt and related costs "will be recovered by Sibir in due course even if the properties are sold on a heavily discounted basis."

The global economic crisis and declining equities, which in some cases have been used as collateral to secure debts, have made it difficult for borrowers to refinance loans.

Chigirinsky was exposed to "the threat of margin calls" from lenders, Sibir said.

The city of Moscow, which holds a stake in the oil company, in December challenged the proposed property purchase, prompting major shareholders to reassess the plan.

On Dec. 18, Chigirinsky had pledged to compensate Sibir shareholders for any potential losses from buying the property. The deadline for the real estate asset sale was set by the end of June 2010 at that time.

Chigirinsky will need to repay Sibir $115.4 million after the oil company in October agreed to buy the Sovietsky Hotel in Moscow, built in 1952 on the orders of Soviet leader Josef Stalin. The transaction, which also included some other assets, will be reversed now.

The Chigirinsky-owned unit will also need to repay $192 million to Kesayev, who in turn raised these funds from Sberbank.

Chigirinsky used his indirectly owned stake in Sibir to secure the borrowing from Kesayev, who used the assets as collateral for the loan from Sberbank.

Chigirinsky and Kesayev together own 47 percent of Sibir, which relies on the Siberian Salym fields for most of its oil extraction. The fields, equally owned by Royal Dutch Shell, Europe's largest oil company, produce about 147,000 barrels of crude a day.

Under the agreement, failure to repay the debts by the mid-October deadline could result in Sibir taking possession of the real estate portfolio.

Companies linked to Kesayev may also obtain control of Chigirinsky's interest in Sibir if he fails to pay the debt to Kesayev by mid-October.

Chigirinsky's holding may still be used as collateral for a Sberbank loan.