AAR Votes Against BP-Proposed $1 Billion Dividend

AAR, one half of Russian oil and gas giant TNK-BP, has announced today that its Board of Directors has voted against TNK-BP partner BP's proposal to pay out a $1 billion dividend.

The company said in a statement today that due to uncertainties in the market and in TNK-BP's governance it did not feel that a payout of the $1 billion dividend was advisable.

"At a time of continuing market uncertainty and while corporate governance at TNK-BP remains strained, we believe that a cautious stance by shareholders is called for," CEO of AAR Stan Polovets said. "A payment now of an additional dividend is not prudent."

Governance of the company, in which BP and AAR each hold a 50 per cent stake, remains uncertain since BP announced last month that it was planning to sell its stake in the company. While AAR has expressed interest in the shares. Russian oil major Rosneft has also entered into discussions with BP for the stake.

Tensions between BP and the other shareholders in the TNK-BP consortium will be furthered ignited by this latest decision as BP faces a large bill to other company shareholders. In a court decision announced on Friday, BP was ordered to pay $3 billion in damages to minority shareholders in AAR following a failed deal with Rosneft, a decision which the company has described as "unjustified".

With the damages looming over the company should a planned appeal be unsuccessful and the decision of AAR not to pay out dividends, BP may soon harshly feel the effects of its involvement in TNK-BP.

AAR in its statement today said that the BP's involvement in TNK-BP was responsible for a majority of BP's dividends and seemed to hint that the company would feel the pinch as a result of AAR's Board's decision.

"TNK-BP contributed over 90 per cent of BP's dividends last year (i.e.: $3.75 billion out of $4.1 billion)," the statement said. "TNK-BP has not paid any dividends this year attributable to 2012 income."

BP have not yet made any comment on the rejection of the dividend proposal.