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. Last Updated: 07/27/2016

EBRD Says Court Cut $7M Off Debt Oil Firm Owed It

A regional court has illegally reduced a Russian oil company's $35 million debt to the European Bank for Reconstruction and Development, a senior official at the bank's London headquarters charged Tuesday.

A Siberian court reduced the debt of the Chernogorneft company to the EBRD to $26 million by offsetting $7 million of it with money in an escrow account, which is used to store funds for future payments of the loan, said Noreen Doyle, deputy vice president at the EBRD.

"We have filed an appeal with respect to that,'' Doyle said in a telephone interview.

The bank had also contacted the local governor and Prime Minister Sergei Stepashin on the issue, he added.

The EBRD has raised its provisions against possible future losses in Russia, in the expectation that many of its debtors will become insolvent.

On Friday, the court unilaterally changed the loan amount ahead of a meeting of Chernogorneft's creditors, the EBRD said.

The oil-producing company, part of the Sidanko holding group, is in the middle of a murky bankruptcy case. Sidanko is fighting to reinstate its control over the subsidiary, which is also being sought by the Tyumen Oil Co, or TNK.

Sidanko is 10 percent owned by BP Amoco.

By changing the loan amounts in the creditor register, and thus the creditors' respective voting power, at the Friday meeting, the local court paved the way for the appointment Tuesday of an external manager actually representing a minority of the creditors, Doyle said.

"There was manipulation of the register, which led to creditors supporting Sidanko only getting 42 percent of the votes,'' said Sergei Kitin, Sidanko's arbitration manager.