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. Last Updated: 07/27/2016

Sidanko Pays Debt To Save Subsidiary

In an attempt to head off creditors' moves to demand the sale of oil major Sidanko's beleaguered daughter company Varyoganneftegas, Sidanko said Tuesday it had paid off all its debts to the company of 381.7 million rubles ($13.5 million).

The payment should go a long way toward restoring the solvency of Varyoganneftegaz, or VNG, located in Khanty-Mansiisk, Western Siberia, said Sidanko spokesman Denis Davydov on Tuesday. The oil producer is under external management and has debts totaling 518.8 million rubles, he said.

In a case that raises parallels with Tyumen Oil Co.'s aggressive takeover bid last year for Chernogorneft, another Sidanko subsidiary, creditors of VNG headed by the Alliance Group voted at two creditors' meetings this month for the company to be sold off at auction.

Sidanko, which holds a controlling stake in VNG with voting interests worth 74 percent, has said both meetings were convened in violation of a court injunction forbidding the meetings.

"Such a clear violation of federal law by the external manager ignoring the injunction leads us to think that the bankruptcy procedure is aimed not at restoring solvency but at the illegal transfer of VNG's assets from its legal owner," Sidanko said Friday in a statement after the last creditors' meeting.

There has been no court date set so far to rule on whether a sale will take place, but Alliance insists that the meeting's decision was legally valid because there were enough creditors attending for a quorum to have taken place, said Alliance spokesman Sergei Vakunov.

Vakunov confirmed Alliance would be bidding for the company if an auction was set. He said the starting price for VNG has been set at $91 million. Alliance has bought 67 percent of VNG's debt on the secondary market, he said.

However, Sidanko fired back Tuesday: "We met our obligations on making the settlement to VNG and we now expect the external manager to meet his obligations before the law to restore VNG's solvency by paying off its debts to creditors," Davydov said.

"The external manager now has real possibilities to pay off VNG's debts. Bankruptcy means that a company is unable to pay off its debts, but the manager has just received $13.5 million to help pay off the $18 million the company owes in total," he said.

However, Vakunov said the company's total debts were "1 billion rubles," much more than Sidanko's estimate, and the payment made by Sidanko would not save VNG from bankruptcy.

Davydov said Sidanko on Monday sent documents confirming payment of the sum and a request for information on the company's current financial situation to VNG's external manager. He said Sidanko expects an answer by the end of the week.

The VNG field extracts 2.5 million metric tons of oil per year, according to Davydov. He said profits made by the company this year meant that insolvency and the company's sale should be avoided. However, he would not put a figure on the profits.

The debt payment to VNG was made in line with a Sidanko restructuring agreement clinched in January this year, Davydov said.

Spokesman for major Sidanko shareholder BP Amoco Howard Chase said the conflict was "first and foremost a matter for Sidanko with the support of its shareholders."

He said that "VNG was an important part of the Sidanko business."