Yukos was forced into reorganization because Russian authorities are proceeding with the sale of the Company's largest unit, Yuganskneftegas, which accounts for roughly 60% of the Company's oil production. If allowed, the sale of Yuganskneftegas will cause the Company to suffer immediate and irreparable harm. In addition, Yukos Oil Company's bank accounts and other assets have been frozen by Russian authorities as part an unprecedented campaign of illegal, discriminatory, and disproportionate tax claims escalating into raids and confiscations, culminating in intimidation and arrests. These actions have severely damaged Yukos and the company's ability to conduct normal business operations.
The company made the filing in the United States Bankruptcy Court for the Southern District of Texas, Houston Division. U.S. Bankruptcy law has worldwide jurisdiction over property of the debtor and the Company is seeking a judiciary that will protect the value of all shareholder's investment in Yukos. Houston is a major international oil and gas center. Yukos has assets and business dealings in the area. In addition, the Company's Chief Financial Officer is currently fulfilling his management responsibilities from Houston.
Yukos is asking the Court for a Temporary Restraining Order halting the planned Sunday auction of Yuganskneftegas by Russian authorities. The order seeks to prevent the Russian Government, the auction bidders and financiers from participating in the sale process of purchasing, attempting to purchase, facilitating the purchase, financing or encumbering the property of Yukos.
"The management of Yukos has worked tirelessly and in good faith over the past year to establish a dialogue with the Russian authorities in an attempt to work out a compromise that would have prevented today's reorganization filing. We have submitted more than 70 settlement offers and publicly stated that reorganization was a distinct possibility if a reasonable resolution was not reached. It is regrettable that we did not receive one substantive response," said Yukos Chief Executive Officer Steven Theede. "The steps we took today were done as a last resort to preserve the rights of our shareholders, employees and customers. Unfortunately, we believe it was the only resort left for us."
"The selective and retroactive application of tax law by Russian authorities is improper under Russian and international law and has directly resulted in the loss of approximately $38 billion in market value for our investors. The actions by the Russian authorities appear to be expropriation - 21st century style," said Theede.
The Russian authorities have pursued an unprecedented campaign against Yukos by asserting tax claims (in excess of 100% in 2001 and 2002 and 80% in 2003 of the company's annual consolidated gross revenues - not net income, consolidated gross revenues) that are not consistent with Russian tax policy or the rule of law. As a result of these obviously exorbitant claims, the Company believed it has no other choice but to seek reorganization protection while pursuing its damage claims.
"Yukos worked and fought hard to become the most transparent and successful company in Russia, as well as one of the most efficient and successful oil and gas companies in the world. In many ways it became the poster child for business reform in Russia. On behalf of our 100,000 employees, shareholders and customers, management is committed to do everything in its power to maintaining our position as leader in the world energy markets and an example of the spirit and accomplishments of the Russian people," said Theede.
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