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№ 3 (March 2009)

Bond Holders Threaten SSK with Bankruptcy

Russia’s financial daily newspaper “Vedodmosti” reported Tuesday that Russian drilling contractor Siberian Service Co. (SSK) is being pressured by three creditors who are threatening to force SSK into bankruptcy.

By Alexsey Chesnokov and Pat Davis Szymczak, Oil&Gas Eurasia

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Russia’s financial daily newspaper “Vedodmosti” reported Tuesday that Russian drilling contractor Siberian Service Co. (SSK) is being pressured by three creditors who are threatening to force SSK into bankruptcy.

Creditors intent on exercising their buy-back option are preparing to force SSK into a  default on $100 million in foreign currency bonds placed in March, 2008. Though SSK reportedly made good on a recent coupon payment of $6.875 million, creditors have the option to require SSK to buy-back the entire debt upon demand. No legal actions have been taken – indeed, under terms of the bond issue, SSK entered technical default only on March 27, and it's period ended at 3-d of April. And after that factual default matured.

But as the business day opened in Moscow on Monday, some creditors had begun to leak information to Russian media in an apparent move to put pressure on SSK in what could be an attempt to take over the company.

 “Vedomosti” reported it was told by representatives of the creditors that they plan to force SSK into bankruptcy so as to remove its shareholders. On Tuesday Uralsib officials confirmed their bank is one of the three creditors involved in the campaign. Two others are Russian bank Petrocommerce, and Argo Capital Management Group in the UK, sources told Oil&Gas Eurasia.

On Tuesday, Uralsib’s chief strategist, Chris Weafer reported in his morning market e-mail market note: “Reports that Siberian Services, a Russian oil drilling company, has defaulted on a $100 mln of foreign currency bonds will add to credit risk in Russia.”

According to “Vedomosti” creditors argue that SSK has the resources to repay the debt. The newspaper quotes 2008 sales revenue at $900 million and $60 million net profit.
SSK officials refused comment when contacted by Oil&Gas Eurasia on Tuesday. And meanwhile, “Vedomosti” reported that under Russian law a bankruptcy filing is possible only after a three month delay in payments.

A former Yukos subsidiary, SSK is Russia’s second largest oilfield service company and drilling contractor. Its major client is Rosneft which purchased key Yukos assets, though it also has contracts with Gazpromneft, Shell, Imperial Energy and Novatek. SSK has pinned its future growth on Rosneft projects in East Siberia, including participation in a $15 billion joint project with China, and possibly work in Iraq. Rosneft was invitged by the Iraqi government to participate in a tender for the development of 11 oil fields with 2.5 billion barrels in estimated reserves, “Vedomosti” reported. Among SSK’s shareholders is former Russian oil and gas minister Yuri Shafranik.

- Copyright 2009, Eurasia Press. All rights reserved.
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