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. Last Updated: 07/27/2016

Sidanko Losing Control Over Varyeganneftegaz

Oil major Sidanko’s production subsidiary Varyeganneftegaz slipped further from Sidanko’s grasp Monday after its major creditor Alyans Group won a court case to install its manager at Varyeganneftegaz.

Varyeganneftegaz, which produces 2.5 million tons of oil a year, came under bankruptcy proceedings in April 1999 when a regional medical insurance fund brought a law suit against it over unpaid mandatory contributions.

Alyans’ subsidiary Alyans Capital now holds 70 percent of Varyeganneftegaz creditors’ debt.

External management was introduced in July last year, with managers supported by Alyans or Sidanko put in charge of the western Siberian company at different times.

The Khanty-Mansiisk arbitration court on Monday installed Leonid Borzunov as the external manager at Varyeganneftegaz. Recommended by the local administration, a creditors’ meeting July 19 approved Borzunov’s appointment.

Sidanko says it had expected the bankruptcy process to end because it had paid in full its debts to the budget and creditors amounting to 400.9 million rubles ($14.5 million) and 358 million rubles, respectively. Alyans refuses to recognize the debt payment, which it says was illegal.

Alyans argues that Sidanko as a creditor should have had an agreement with Varyeganneftegaz on debt payment and that the agreement should then have been approved at a creditors’ meeting.

Sidanko made no agreement nor did a creditors’ meeting approve an agreement, Alyans spokesman Sergei Vakunov said Tuesday.

He added that "neither the creditors nor the budget organizations have received anything, Sidanko’s payment of debts is nothing but a declaration." Vakunov also said that should a creditors’ meeting decide to auction Varyeganneftegaz to cover the debts, Alyans will take part in the bidding.

Sidanko spokesman Denis Davydov said Tuesday that Sidanko intends to appeal Monday’s court ruling. He had no further comment.

Dmitry Avdeyev, oil analyst at United Financial Group, said it was hard to say what the outcome of litigation between Alyans and Sidanko will be.

He said that Varyeganneftegaz should be earning at least $150 million a year, which is much greater than the production unit’s debts.

"Sidanko has sufficient cash flows to pay the debts of Varyeganneftegaz, but Alyans does not want to accept this payment," Avdeyev said. "The bankruptcy proceedings are being manipulated by Alyans. It is obvious that its [Alyans’] task is not getting the debt payment, but to get control of the enterprise."