LONDON/MOSCOW May 31 Banks that helped Russian
oil company Rosneft finance its $55 billion buyout of
rival TNK-BP have been left waiting for their payback - a share
in $15 billion in asset sales expected to follow the deal,
sources familiar with matter said.
State oil company Rosneft's takeover of TNK-BP this year
aimed to create a major oil group producing more oil than Exxon
Mobil, but it also tightened the Russian government's
grip on the country's energy sector.
The asset sales promised by Rosneft Chief Executive Igor
Sechin would offload less-profitable businesses to turn the
company into the major oil player the CEO has said he wants it
to be. The delay shows Rosneft has a lot on its plate
integrating TNK-BP and that the sales are on the back burner.
Rosneft had dangled the juicy divestment mandates at the
banks in exchange for a $29.8 billion loan - the largest in
Russia's history - on good terms, three out of four sources with
direct knowledge of the loan talks said.
"All the lending banks are waiting," said one of the bankers
who asked not to be named because the talks are private.
"We thought (refinancing) bonds and asset sales would kick
start straight after the closing (of TNK-BP deal). We are now in
Rosneft declined to comment.
Rosneft's slow motion is frustrating the banks as they would
earn fat fees from advising the oil giant on the asset sales
this year, which would help boost M&A revenues in an otherwise
arid deal making landscape.
M&A activity across all sectors is down 7 percent in Europe,
Middle East and Africa since January according to Thomson
Reuters data, partly due to the impact of the euro zone crisis
on business confidence.
Banks that maintained big balance sheets throughout the
financial crisis have been hoping to use this muscle to win
lucrative M&A advisory business from rivals which had to shrink
partly to meet tough European capital rules.
Banks often use their balance sheets to offer cheap loans to
corporate clients to secure higher-margin business such as share
or bond issues or M&A work.
Big balance sheets helped Barclays and Deutsche
Bank, for example, to achieve number 2 and 3 rankings
in M&A league tables last year, challenging U.S. rival Goldman
Sachs, which had the top slot, Thomson Reuters data showed.
Rosneft's jumbo loan raised $16.8 billion in 2012 and $13
billion earlier this year to finance the TNK-BP deal with banks
including Bank of America Merrill Lynch, Barclays
, BNP Paribas, Citi, Credit Agricole
, JP Morgan, Mizuho, Societe Generale
Soon after deal closed, Rosneft planned a bond issue to
refinance part of the loan. But the company turned instead to
Russia's domestic bond market where big Russian banks such as
Sberbank and VTB dominate.
Rosneft is also doing an M&A deal, but plans to buy a local
gas firm rather than sell off some of its own assets.
NO HURRY TO SELL
As a result, the banks' hopes of getting their hands on the
asset sales business quickly could be disappointed.
The timing and extent of any disposals were never discussed
in depth with the banks and have yet to be approved by the
Kremlin, all of the sources said.
"These assets are producing on-shore fields, they are big
cash cows. The pressure to sell is not there", said the first
"They (Rosneft) have never sold anything, ever. It's not in
their genes." said a second banker, who said Moscow was
currently reviewing which assets were no longer strategic and
could be sold.
One of the sources, on the Rosneft side, confirmed the
parties to the loan talks touched on possible asset sales after
the closure of the deal but without reference to particular
assets or mandates. "It was never discussed in such specifics."
The asset sales are also considered a test of CEO Sechin's
ability to get to grips with the Rosneft empire, and re-fashion
it into a modern, efficient corporation.
But Sechin, ally of President Vladimir Putin for more than
20 years, also is under pressure to ensure that the oil which
underpins the Russian economy remains safe in trusted hands.
Rosneft's main non-core assets are in Western Siberia, where
the company pumps most of its crude. Some of these are mature
and the company struggles to squeeze out a margin.
A sale of these fields would also mark a reversal in the
Kremlin's decade-long drive for control of Russia's oil riches.
Western Siberia's fields make up 70 percent of Rosneft's
market capitalisation, according to one analyst estimate. They
also host, deep underground, some of Russia's biggest potential
unconventional resources which are seen as key to mid-term
Potential buyers are therefore expected to be mainly Russian
companies Lukoil and Gazprom but also some
resource-hungry Asian players, the bankers said.