Exclusive: As Fed looms, Morgan Stanley sets sale of U.S. oil terminal business

Wed Dec 11, 2013 6:07pm EST
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By Jonathan Leff and Michael Erman

NEW YORK (Reuters) - Morgan Stanley (MS.N: Quote) has launched a formal effort to sell its controlling stake in U.S. oil terminal and transport business TransMontaigne, four sources said on Wednesday, following other Wall Street powerhouses in yielding to intense regulatory pressure to get out of commodity investments.

The bank has started circulating preliminary information about the assets it could sell, which include the general partner of master limited partnership (MLP) TransMontaigne Partners LP TLP.N, the sources said. One source said the offer also included a handful of assets outside the MLP.

The sale process appears to be Morgan Stanley's first definitive step toward disassembling its vast energy trading group, after a more than year-long informal effort failed to find a buyer or partner for the whole operation.

The move comes amid intensified regulatory pressure to dump contentious commodity investments, particularly those that pose a liability risk. Morgan Stanley and Goldman Sachs (GS.N: Quote) have argued, seemingly in vain, that a 1999 legal exemption allows them to continue owning oil tankers and pipelines.

They "see the handwriting on the wall", said Craig Pirrong, a finance professor at the University of Houston.

"And oil logistics is something that gives the Fed major concern. 'What if there's an oil spill at a bank-owned storage facility or from a bank-chartered tanker?' is the favorite doomsday scenario used to suggest that banks shouldn't be in physical commodities," he said.

Morgan Stanley declined to comment on the sale process. Financial details about the deal were not available, and the bank provided no estimate on a value or timeline.

While the eventual sale of TransMontaigne had been widely expected by many industry executives given mounting regulatory pressure on Wall Street's commodity traders, the abrupt shift to a formal process was unexpected.   Continued...

A view of the Morgan Stanley headquarters building in New York's Times Square, February 3, 2010. REUTERS/Brendan McDermid