Tatneft Reschedules Debt, Pays Bond

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Tatneft, the nations fourth-largest oil producer, on Tuesday reached an agreement with its creditors to restructure its debts and concluded negotiations that had dragged on for two years.

Tatneft shares traded on the Russian Trading System climbed 5.71 percent to $0.5180 by mid-afternoon and closed up 3.06 percent for the day at $0.5050.

Shafagat Tahautdinov, general director of Tatneft and Albert Stein, of Chase Manhattan Bank, which represents Tatnefts foreign creditors, said at a news conference that they had signed an agreement on the restructuring terms.

Tatneft, a 50-year-old oil company based in Tatarstan, has annual output of 24 million tons.

Tuesdays agreement marked the rescheduling of short-term debt totaling $354 million. That includes short-term credits worth $15 million issued by Chase Manhattan Bank, Berliner Bank and Dresdner Bank, and $339 million of unsecured credit from Soci?t? G?n?rale, West Merchant Bank, BHF Bank, Credit Agricole Indosuez, CS First Boston and local bank Zenit.

Tahautdinov also announced that the company had paid a $13.5 million coupon on its 2002 Eurobonds by the Oct. 29 deadline. This was the first time in three years that the company did not make use of the 15-day grace period for payment of the coupons. Over the next two years, the company will make payments on the remaining sum of $300 million in Eurobonds.

After becoming a joint-stock company in 1994, Tatneft became one of the first local companies to borrow from Western creditors.

Tahautdinov said the credits received by Tatneft stabilized production and let it build 14 new oil fields.

Tahautdinov said Tatneft had urgently needed to borrow in the early '90s. "Tatneft was experiencing serious problems and needed to arrest a sharp decline in oil production."

Tatnefts borrowing had immediate beneficial effects on the companys productivity.

Tahautdinov reported that the credits received by Tatneft in 1996 enabled the company to commission 14 new oil fields and by 1997, the company had successfully stabilized production.

However, the financial meltdown in August 1998 resulted in Tatneft defaulting on a number of credits totaling $700 million.

Yury Kafiyev, head of the analytical department at the investment company Olma, noted that two years ago, Tatneft couldnt even pay consultant fees.

Tahautdinov noted that the process of restructuring the companys debts was greatly assisted by the positive factors of "the favorable tax regime of Tatarstan and the growth of oil prices."

According to the terms of the agreement, for the next two years Tatneft will make monthly payments amounting to between $15.5 million and $22 million. The exact amount each month will vary depending on the price of oil. The interest rate is set at LIBOR plus 3.95 percent plus commissions.

Investors will also be encouraged by actions taken by the Tatarstan administration to repay its debts to Tatneft. In 1999, the administrations debt to Tatneft shrunk from $196 million to $46 million.

Tatarstan authorities began borrowing from Tatneft in late 1997. Tatneft did not forewarn its investors that it would lend to the Tatar government.

"It was an unpleasant surprise for investors that the Tatarstan authorities began borrowing from Tatneft," said Gennady Kraskovsky, oil and gas analyst for the NIKoil brokerage. "Tatneft should give its investors a signal that this wont happen again," he said.