White & Case Leads On Novel $100 Million Zhaikmunai Listing
May 2008, Legal Business

As reported in Legal Business, White & Case advised Zhaikmunai, a Kazakh oil and gas company, on its $100 million initial public offering.  This was the first-ever listing of global depositary receipts in London by a limited partnership, which in itself required a change in law in the Isle of Man.

Originally planned for December 2007, the highly complex offering was delayed when the Kazakh Ministry of Energy and Mineral Resources declared an interest in Zhaikmunai's assets.

"It was the first time that the Ministry had expressed an interest in acquiring the assets that are actually going to be listed," said Allan Taylor, a partner in the Corporate Practice at White & Case in London, who led the White & Case team advising Zhaikmunai.  "The fact that it gave serious consideration to investing in the company shows the quality of assets that were up for IPO."

If the Ministry is interested in a company's assets, it will respond to a waiver application within 30 days and if no response is received, it is assumed that the IPO can proceed.  In Zhaikmunai's case, the Ministry responded after 40 days.  Had Zhaikmunai proceeded after 30 days, this could have resulted in a very unsatisfactory position, given the competing interests of the investors in the IPO and the Ministry.

"It would be very difficult to enforce transfer restrictions on securities of a non-Kazakh entity, but there is a drastic remedy available to them, which is to say that you are in breach of the law and therefore the licence," said Taylor.  "The consequences of a breach are so serious that it's a risk neither we nor the client were willing to take; the state could ultimately have reclaimed the assets."

The listing is one of only a handful that have come to market this year, following the drop in equity capital market activity levels off the back of last year's credit crunch.

"The situation was unsustainable both in term of what the market could absorb and also for the people actually doing the deals," commented Taylor.  "I'm not sure practitioners would have been able to keep up with the pace that we've seen over the last few years.  We've seen corrections in a number of markets, so we shouldn't be surprised that we're seeing them in a number of listings too."