March 27, 2013 6:28 pm

Shares in TNK-BP offshoot fall

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The share price of TNK-BP Holding has fallen nearly 40 per cent over the past five trading days amid uncertainty about new owner Rosneft’s commitment to minority shareholders.

The company is a subsidiary of oil company TNK-BP Intl, which was sold for $55bn to Russia’s state oil company last Friday. Five per cent of its ownership is freely floating shares that Igor Sechin, Rosneft’s chairman, has so far refused to buy out. The sell off began on Friday, when the final sale of TNK-BP was completed for $55bn.

Mr Sechin at the time said in an interview with Russia 24 news channel: “We have made no commitments to minority shareholders. That is a question for the previous shareholders. I feel sorry for them but they made their choice in favour of TNK-BP.”

Then on Monday Rosneft’s board approved a limit on borrowing of up to $10bn from various companies of TNK-BP, which the market appears to fear is the intention to strip cash from TNK-BP without paying dividends.

“Rosneft’s recent actions and comments do not indicate to us any commitment to buy out minorities or maintain dividend payments [at the previous level],” Renaissance Capital, the Moscow investment bank, said in a research note on Wednesday

“Taken altogether, it sounded like ‘we don’t care about minorities’,” said Ildar Davletshin, oil and gas analyst at RenCap, who pointed out that oil company BP, which acquired a 20 per cent stake in Rosneft in the deal, has much at stake in the way minority investors are treated in Russia.

“The new situation developing around TNK-BP minorities does not give us much hope that minority interest in Rosneft will be protected, and for global investors in BP, that is an issue,” he said.    

Ever since the sale of TNK-BP was announced in October, Mr Sechin has maintained he is responsible only to Rosneft’s shareholders, and not TNK-BP’s.

Alexander Burgansky, analyst at Moscow’s Bank Otkritie said that “the eventual treatment of TNK-BP minorities will serve as a bellwether of corporate governance in Russia”.

Nevertheless Mr Burgansky has advised clients to buy the stock because he believes the market is overreacting. “Where I disagree with the market is that I think it is too early to make this judgment, as I do not see anything wrong so far.”

He pointed out that the loan agreement announced on Tuesday was simply setting limits for such a possible loan and no such loan has beenrequested.

Rosneft declined to elaborate on Mr Sechin’s comments on Friday.

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