US Proposal Targets Lukoil Overseas Asset Sales to Compensate American Investors

Key Moments

Investment Bank Pitches Swap Structure to U.S. Treasury

U.S. investment bank Xtellus Partners has put forward a plan to the U.S. Treasury that would direct proceeds from the sale of Lukoil’s overseas assets toward U.S. investors who incurred losses when their Lukoil holdings were frozen following Russia’s invasion of Ukraine, according to people familiar with the matter.

Major U.S. asset managers such as BlackRock, JP Morgan and Goldman Sachs first froze and later wrote off large positions in Russian companies. As a result, they suffered billions in losses after the conflict began in 2022.

Four sources said Xtellus outlined a structure to the Treasury. Under it, U.S. investors would exchange their Lukoil securities in a cashless transaction. In return, Lukoil would transfer its overseas assets into a pool for eventual repayment. In return, Lukoil would transfer its international assets into a dedicated pool. That pool could later be monetized to repay U.S. shareholders. This structure avoids cash transfers restricted by sanctions.

The existence of this proposal had not been disclosed previously.

The U.S. Treasury declined to comment, and Lukoil also provided no comment on the matter.

Role of Boehly and Allied Investment Partners

According to the sources, Xtellus is advising American billionaire Todd Boehly alongside Allied Investment Partners, an investor group based in the United Arab Emirates, in connection with the proposed arrangement.

A representative for Boehly declined to comment, while Allied Investment Partners did not respond to a request for comment.

Global Interest in Lukoil’s Overseas Portfolio

Lukoil’s international asset base, estimated at $22 billion, has drawn attention from a broad range of potential buyers. Interested parties have included U.S. private equity firm Carlyle and Chevron, among others, the sources said.

In October, the United States imposed sanctions on Russia’s two largest energy producers, Rosneft and Lukoil, as part of efforts to pressure Moscow into a peace agreement with Ukraine. Lukoil has been particularly affected, with its overseas operations disrupted across multiple geographies, including Iraq and Finland.

The company faces a deadline of December 13 to complete the sale of its foreign assets, according to two additional sources. Lukoil has requested more time to advance negotiations and work on potential transactions.

Sources indicated that settling payment in shares rather than cash could accelerate any deal. Western sanctions currently in place against Lukoil restrict cash transfers to the company, making a securities-based structure more feasible.

Before the conflict, Western investors collectively owned more than one quarter of Lukoil’s outstanding shares. The company’s value is currently estimated at around $50 billion.

Potential Buyers and Deal Structure

If the plan moves forward, Boehly and Allied Investment Partners would aim to dispose of Lukoil’s overseas assets, most likely to other energy companies, the sources said. Any prospective buyer would first need to secure Lukoil’s agreement on the structure before submitting the transaction to the U.S. Treasury for approval.

Xtellus Background and Index Removal

Xtellus was created in 2018 following a management buyout of the U.S. operations of VTB Capital, the investment arm of what was then Russia’s second-largest bank.

Lukoil previously featured in major equity indices that serve as benchmarks for institutional investors and exchange-traded funds. Index providers such as FTSE Russell and MSCI removed Russian equities from their indices in March 2022 after Russia’s invasion of Ukraine, removing Lukoil from those benchmarks.