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TNK-BP Drops Second Day on AAR Loan Concerns: Moscow Mover

October 01, 2012

TNK-BP fell for the second day on investor concerns Russia’s third-largest oil producer will have to take on debt to help its billionaire shareholders fund their acquisition of BP Plc (BP/)’s 50 percent stake in the venture.

TNK-BP fell 1.3 percent to 83.25 rubles by 1:04 p.m. in Moscow, heading for the biggest drop since Sept. 21. The stock lost 1.3 percent last month. The Micex Index rose 1 percent to 1,472.60.

AAR, which represents the billionaire partners in the Russian energy company, hired Rothschild Group to organize the loan from a group of banks, Chief Executive Officer Stan Polovets said today by e-mail. The loan will probably be structured so that TNK-BP is the borrower, rather than AAR.

“Investors are selling the stock on fears that TNK-BP may be forced to take on AAR’s debt,” Alexei Kokin, a senior oil and gas analyst at UralSib Capital, said by phone. “The more reports like this, the more uncertainty this creates for the investors.”

AAR, which represents billionaires Mikhail Fridman, German Khan, Victor Vekselberg and Len Blavatnik, last week decided to bid for BP’s entire 50 percent stake, rather than the half it sought earlier. BP plans to exit from TNK-BP after clashing with AAR over strategy and failing last year to form an alliance with Russia’s biggest oil company, OAO Rosneft, following a legal challenge from AAR.

Rosneft, headed by President Vladimir Putin’s former deputy for energy, Igor Sechin, is also seeking to buy out BP from TNK- BP, and is looking for as much as $15 billion in loans, two people with knowledge of the plans said Sept. 19. TNK-BP’s listed unit, which doesn’t include its overseas assets, has a market value of about $40 billion.

Bid Period

BP will invite formal offers in mid-October, a person with knowledge of the plan said last week, asking not to be identified because the matter is confidential. That will fall near the end of a 90-day period during which BP must negotiate in good faith with AAR. BP is allowed to hold talks with others during the period and may continue talks with AAR thereafter.

BP and AAR went to arbitration in 2011 over the U.K. explorer’s plan to form an alliance with Rosneft. The deal failed after the billionaires blocked a $7.8 billion share swap and Arctic exploration accord, arguing that BP was required to pursue all opportunities in Russia exclusively through TNK-BP. BP and Rosneft offered AAR $32 billion for its stake in the venture last year, which they turned down.

No Objections

BP CEO Bob Dudley told investors in July that they should be open to a combination of cash and shares for TNK-BP, which has paid BP $19 billion in dividends since 2003 and accounts for a quarter of the company’s global output.

Prime Minister Dmitry Medvedev’s government has questioned Rosneft’s bid for BP’s stake, BP and Sechin have said the U.K. explorer may use some of the proceeds to buy Rosneft shares from the state.

“The state shouldn’t expand its direct participation in the economy, including through having state companies acquire private companies,” Deputy Prime Minister Arkady Dvorkovich has said, according to his press secretary, Aliya Samigullina. “The government has no objections to AAR increasing its stake in TNK- BP.”

The loan agreement with Rothschild was reported earlier by Kommersant, citing unidentified people.

To contact the reporters on this story: Ksenia Galouchko in Moscow at; Torrey Clark in Moscow at

To contact the editor responsible for this story: Gavin Serkin at

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