(Bloomberg) -- Sistema PJSC, billionaire Vladimir Evtushenkov's holding company, plunged as much as 37 percent in Moscow trading Wednesday and borrowing costs surged after state-run oil producer Rosneft PJSC filed a $1.9 billion court claim against it.
Rosneft is seeking to recoup as much as 107 billion rubles ($1.9 billion) from Sistema, the Moscow Arbitrage Court said on its website late Tuesday. That's equivalent to about 66 percent of the company's market capitalization. The claim covers alleged damage to Bashneft PJSC, which Sistema owned through 2014 before the state reclaimed it and later sold it to Rosneft, according to Kommersant daily.
Sistema closed down 37 percent in Moscow at 14.06 rubles a share, the biggest drop since September 2014. The yield on the company's $500 million of bonds maturing in May 2019 jumped 154 basis points to 4.9 percent.
“If the claim is settled in full, Sistema will have to significantly increase its debt load or sell some of its assets,” analysts at Uralsib Financial Co. including Konstantin Chernyshev wrote in a note to clients. “We are withdrawing our recommendation for Sistema until we receive more clarity.”
Russia nationalized Bashneft in 2014, seizing the shares held by Evtushenkov's holding company Sistema amid a money-laundering case that was later dropped. Rosneft, which is headed by President Vladimir Putin's ally Igor Sechin, now controls Bashneft after buying the state's more than 50 percent shareholding in October.
Read this story for more on Rosneft's acquisistion of Bashneft
Sistema said Wednesday in a statement it has yet to receive documents on Rosneft's claims. Rosneft declined to comment.
The law suit also poses a “significant risk” to wireless carrier Mobile TeleSystems PJSC, a unit of Sistema, which may have to take on part of the debt burden, the Uralsib analysts said.
Shares in MTS dropped 10 percent, the most since March 2014, and yields on the company's ruble debt maturing in November jumped 139 basis points to 10.74 percent. Sistema's Detsky Mir PJSC retail unit closed down 7 percent.
While the outcome of the claim remains uncertain, “the presence of the charges represents a substantial risk to Sistema's shareholders,” BCS Financial Group analysts including Igor Goncharov wrote in a note to clients.
--With assistance from Stephen Bierman and Rita Nazareth
To contact the reporters on this story: Ilya Khrennikov in Moscow at ikhrennikov@bloomberg.net, Natasha Doff in Moscow at ndoff@bloomberg.net.
To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Alex Nicholson, Torrey Clark
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