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Banks In The Dark Over $15 Billion of Promised Rosneft M&A business

Banks that assist Russian oil company Rosneft finance its $55 billion buyout of rival have been left waiting for their payback a share in $15 billion in asset sales projected to follow the deal.

State oil company Rosneft’s takeover of this year aimed to generate a major oil group producing more oil than however 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 stated he wants it to be. The delay demonstrate Rosneft has a lot on its plate integrating 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, all the lending banks are waiting. We thought asset sales and refinancing bonds would kick start straight following the closing.

Rosneft’s slow motion is annoying the banks as they would earn fat fees from advising the oil giant on the asset sales this year, which would assist boost M&A revenues in an otherwise arid deal making landscape.

M&A activity across all sectors is losing 7 percent in Europe, Africa and Middle East since January partly due to the impact of the euro zone crisis on business confidence.

Banks that uphold big balance sheets throughout the financial crisis have been hoping to use this muscle to win lucrative M&A advisory business from competitor which had to shrink partly to meet tough European capital rules.

Banks frequently 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 Deutsche Bank and Barclays to achieve number 2 and 3 rankings in M&A league tables previous year, challenging US rival Goldman Sachs which had the top slot.


Precious Gold Losses Seemed limited on Cyprus bullion Sale Program

Yellow metal posted its largest one day fall in almost 2 months on Wednesday following Cyprus was forced to sell most of its gold reserves, however analysts stated strong gold buying by other central banks should underpin the price of the metal.

James Steel, chief precious metals analyst at HSBC said that the bigger concern for the bullion market may be the prospective for other distressed euro zone nations to liquidate a portion of their precious metal reserves.

He further said that we do not think this will be the case, but we expect the official sector to remain standout buyers of bullion.

Investor fears over additional gold sales by other debt stricken euro zone members such as Greece and Portugal sent spot gold prices down 1.7 percent on Wednesday, within striking distance of a 10 month low.

Rehabilitated gold interest by emerging economies and gold sales limitations stipulated by Europe’s Central Bank Gold Agreement (CBGA) are positive factors that should place a floor under the market.

Cyprus, one of euro zone’s nominal economies, has to sell excess gold reserves to lift about 400 million euros which is equal to $523 million to assist finance its part of its bailout, an estimation of Cypriot financing needs prepared by the European Commission showed.

At existing prices, 400 million euros worth of yellow metal amounts to 10.36 tonnes, representing just a small fraction of precious metal liquidated by gold exchange traded funds since the start of the year.

It was the first major bullion disposal by a euro area central bank since France sold 17.4 tonnes in the first half of 2009.

According to data from the World Gold Council Cyprus total, gold reserves stood at 13.9 tonnes at end-February.

Strength in the US dollar and a rally in US equities combined with a bearish gold attitude from Goldman Sachs to push futures prices for gold losing by almost $28 per ounce on Wednesday. The turn down came just a day following prices marked their highest closing level since April 1. June gold dropped $27.90 or 1.8%, to settle at $1,558.80 per ounce on the Comex division of the New York Mercantile Exchange.