Sibir Energy – the saga continues | FT Alphaville

Sibir Energy – the saga continues

This is looking distinctly terminal. Thursday’s statement (emphasis ours):

The quotation of Sibir’s ordinary shares on the London Stock Exchange has been suspended today at the request of Sibir. Sibir’s Nominated Adviser, Strand Partners Limited, was informed late on 18 February 2009 that the two circulars recently published by Sibir on 2 December 2008 and 11 February 2009 were not correct in that various Tchigirinski interests are currently indebted to Sibir in an amount of approximately $325 million and not approximately $115 million as set out in the latest circular.

The Board of Sibir will now assess the effect of this increase in the indebtedness on Sibir’s ability to recover the indebtedness and the consequent impact on Sibir’s financial position. The Board of Sibir will in conjunction with the major Russian shareholders who control approximately 67% of the share capital of Sibir conduct an enquiry as to how this has happened. A full statement detailing all the facts and circumstances (including the recoverability of this indebtedness) will be made as soon as possible. The General Meeting of Sibir scheduled for 27 February 2009 will be postponed until further notice.

The background here is that Chalva Tchigirinski is the cash-strapped Russian businessman who owns 23% of Sibir Energy.

Under pressure to sell his holding in Sibir – the stock was used as collateral for bank loans – the company agreed to buy two real assets assets from Tchigirinski back in October 2008 for $157m.

In fact, Sibir advanced $115m as partial payments for the assets – the Sovietsky Hotel and the New Sovietskaya development in Moscow.

By December, Sibir and Tchigirinski had cooked up another deal, whereby the company was to buy a further $340m of real estate assets.

Sibir justified the deal by saying that if Mr Tchigirinski was forced to sell it would have:

devastated the share price and destroyed the existing shareholder structure, exposing the company to ruthless predatory activity.

Shareholders disagreed and the plan was abandoned last month.

Sibir then sent another circular to shareholders detailing a new arrangement with Tchigirinski, which would allow the company to recoup the cash it had advanced for the Sovietsky Hotel and the New Sovietskaya assets. It said at the time:

Mr Tchigirinski has undertaken to sell the properties in the Real Estate Portfolio in order to repay the Sibir Debt and the Orton Oil Debt as soon as reasonably practicable and in any event within a period of 270 days from 15 January 2009;

The nominee owner of each of the properties comprised in the Real Estate Portfolio will grant a power of attorney in favour of Sibir empowering it to dispose of the properties in consultation with Mr Tchigirinski. The price at which such disposals will be made is entirely at the discretion of the Board. For so long as the power of attorney is in place, Sibir shall assume responsibility for funding all costs, fees and expenses of the properties and the costs of the private aeroplane belonging to Mr Tchigirinski, which aircraft is currently being sold. These costs will be added to and form part of the Sibir Debt and will be recovered in accordance with the Deed of Arrangement.

Incredibly, the company has now discovered that it did not extend $115m to Tchigirinski – it extended $325m!

Who controls the bank accounts for this company!?!?

Will the money ever be recovered? Will Sibir shares ever re-list?

Related Link:
Sibir plummets on property deal –