At least one Western bank participating in a consortium that was planning on financing up to $13 billion of Russian gas giant Gazprom‘s bid for the Yukos unit Yuganskneftegaz (“Yugansk”) has decided to postpone its participation in the consortium as a result of the temporary restraining order that Yukos obtained Thursday evening in its chapter 11 case filed on Tuesday evening in Houston. Here are the earlier posts on the Yukos bankruptcy case and the TRO.
Meanwhile, Russian authorities are preparing to proceed with the auction and to ignore the U.S. Bankruptcy Court order. Gazprom, which is predominantly owned by the Russian government, was expected to buy the Yugansk unit at the auction scheduled for Sunday. However, the TRO may chill enough members of the consortium of Western banks that are financing the bid that Gazprom could be effectively prevented from bidding unless it finds alternative financing. And $13 billion in acquisition financing is not easy to find on a weekend.
Nevertheless, Gazprom announced on Friday it is going bid in the auction anyway and has placed a $1.8 billion deposit with the Russian government as a condition to its participation. Three other Russian companies have also registered to participate in the auction.
My bet is that the auction proceeds and that the Russian government steps in to assist Russian financial institutions to provide funding for the successful bidder, if necessary. However, the Yukos bankruptcy case has already succeeded in the sense that it has reminded the Western capital markets that investment in Russian companies remains a high risk proposition. Unless or until the Russian government embraces the reforms necessary to provide Western capital markets with confidence that business transactions will be handled in accordance with the rule of law, Russia’s post-communist economic development will continue to be constrained by the lack of investment from the West.

At least one Western bank participating in a consortium that was planning on financing up to $13 billion of Russian gas giant Gazprom‘s bid for the Yukos unit Yuganskneftegaz (“Yugansk”) have decided to postpone their participation in the consortium as a result of the temporary restraining order that Yukos obtained Thursday evening in its chapter 11 case filed on Tuesday evening in Houston. Here are the earlier posts on the Yukos bankruptcy case and the TRO.
Meanwhile, Russian authorities are preparing to proceed with the auction and to ignore the U.S. Bankruptcy Court order. Gazprom, which is predominantly owned by the Russian government, was expected to buy the Yugansk unit at the auction scheduled for Sunday. However, the TRO may chill enough members of the consortium of Western banks that are financing the bid that Gazprom could be effectively prevented from bidding unless it finds alternative financing. And $13 billion in acquisition financing is not easy to find on a weekend.
Nevertheless, Gazprom announced on Friday it is going bid in the auction anyway and has placed a $1.8 billion deposit with the Russian government as a condition to its participation. Three other Russian companies have also registered to participate in the auction.
My bet is that the auction proceeds and that the Russian government steps in to assist Russian financial institutions to provide funding for the successful bidder, if necessary. However, the Yukos bankruptcy case has already succeeded in the sense that it has reminded the Western capital markets that investment in Russian companies remains a high risk proposition. Unless or until the Russian government embraces the reforms necessary to provide Western capital markets with confidence that business transactions will be handled in accordance with the rule of law, Russia’s post-communist economic development will continue to be constrained by the lack of investment from the West.

The Air Line Pilots Association agreed yesterday not to oppose United Airlines parent UAL Corp.’s effort to terminate the group’s generous defined-benefit pension plan in return for UAL’s agreement to issue to the union $550 million in convertible notes that the active pilots could sell in the capital markets to raise money to cover a portion of the pension shortfall.
The agreement is a key development in UAL’s effort to meet conditions of its exit financing so that it can emerge from its now seemingly unending chapter 11 case. Here are earlier posts on UAL’s bankruptcy case.
UAL is seeking to foist its four pension plans on to Pension Benefit Guaranty Corp. the quasi-governmental agency that insures pension plans. Such a move would save UAL $4 billion in pension contributions through 2008 and is a condition to UAL’s exit financing for emerging from its chapter 11 case. Although the PBGC opposes UAL’s plan to terminate the pension plans, if UAL can persuade the bankruptcy court that it cannot emerge from bankruptcy with that financial burden, then the PBGC would likely be forced to take over the plans.
Inasmuch as lucrative defined-benefit pensions are a highly important component of compensation in legacy airlines’ labor contracts, the fact that ALPA agreed to a deal over its pension with UAL indicates that the union understands that UAL really is on the brink of liquidation.
And that, folks, is the most important lesson that the parties-in-interest in the UAL case must understand if United Airlines is ever going to emerge from chapter 11.

Following on this earlier post regarding Dallas-based Southwest Airlines’ effort to expand its operations at Chicago’s Midway Airport, Southwest won the auction of bankrupt airline ATA’s Holding Corp.’s Midway assets yesterday.

Houston-based independent exploration and production company, Noble Energy Inc., has agreed to acquire Denver-based Patina Oil & Gas Corp. for $2.76 billion in cash and stock. The deal, which is scheduled to be completed by April, is expected to raise Noble’s reserves and production by more than 50%.
Noble will pay approximately $1.1 billion in cash and 27 million of its shares, and assume some of Patina’s debt. Based on Noble’s closing share price of yesterday, the deal values Patina at about $37.89 a share, which is about a 20% premium over its closing price of yesterday.
Noble is acquiring Patina to add to its inventory of development opportunities. Patina’s assets are located primarily in the Rocky Mountain and mid-continent regions of the U.S., which are regions in which Noble already has substantial operations.
Noble’s Charles D. Davidson will remain chairman, president and chief executive of the merged company. Thomas J. Edelman, Patina’s chairman and CEO, will take a seat on Noble’s board along with one other director from Patina’s board. Mr. Edelman will also serve in a special advisory capacity to facilitate the integration of the two companies.