April 13, 2018 / 9:39 AM / 7 days ago

Actions taken on Russian firms by market institutions after new U.S. sanctions

LONDON (Reuters) - Banks, index providers and dealing platforms are trying to distance themselves from a group of Russian companies targeted by the latest U.S Treasury Department sanctions.

The measures give U.S. investors until May 7 to divest any stocks, bonds or other holdings in targeted firms while also barring them from business dealings with the sanctioned companies and individuals after that date.

The sanctions affect seven oligarchs and 12 companies they own or control including En+, GAZ, and aluminum producer Rusal.

Here is a round up of actions taken by ratings agencies, index providers, clearing houses, banks and regulators in response to the blacklist.

INDEXES

- FTSE Russell said it would delete En+ Group and United Company Rusal from FTSE Russell’s equity indexes, effective from the open on April 13.

- MSCI said it may delete Sulzer from its MSCI Equity Indexes after the Swiss engineer’s largest shareholder, Renova Holdings, was included on the new U.S. sanctions list. The sanctioned Russian names are not currently in any MSCI indexes. But Sulzer said on Thursday it was free of U.S. sanctions after authorities approved its buyback of shares, reducing sanctioned Russian oligarch Viktor Vekselberg’s stake to less than 50 percent.

- JPMorgan said Rusal is no longer eligible for its CEMBI index group of emerging market corporate bonds and will be excluded on April 30.

- Bloomberg Barclays Indices said they were watching the story closely and assessing the impact of the proposed sanctions.

- UK’s Financial Conduct Authority (FCA) said it was reviewing the new U.S. sanctions to determine what impact they may have on UK-listed firms.

- ICE said debt issued by Rusal Capital would be removed at its April 30 rebalancing, as debt subject to sanctions do not qualify for its indices. As of March 31, the debt carries a 0.10 percent weight in its Emerging Markets Corporate Plus Index and a 0.07 percent weight in its Global High Yield Index.

RATINGS AGENCIES

- Moody’s has withdrawn its rating on Rusal, citing “business reasons”. It had held a ‘positive’ outlook on Rusal’s non-investment grade Ba3 rating.

METALS

- The London Metal Exchange said Rusal’s aluminum would be suspended from its list of approved brands from April 17 after some members raised concerns about settling contracts with sanctions-hit companies.

- CME Group revoked approved status for Rusal’s metal for delivery against CME aluminum futures contracts, effective from April 10.

TRADE PLATFORMS AND CLEARING HOUSES

- Marketaxess, one of the world’s biggest multi-dealer trading systems, has removed Rusal debt from its platform.

- Tradeweb, one of the world’s largest bond platforms, which is majority-owned by Thomson Reuters Corp, said it no longer carried Rusal debt prices.

- Bloomberg users in Europe told Reuters that Bloomberg had stopped displaying share prices of Rusal, En+ Group and Sulzer. Bloomberg declined to comment.

- Clearing house Clearstream said it would not facilitate transactions in securities issued by so-called Specially Designated Nationals identified by the sanctions.

- Euroclear has suspended automated processing of deals involving securities of the sanctioned firms in favor of manual settlement after due diligence.

BANKS/BROKERS/CORPORATES

- Traders on Wednesday said UBS and Credit Suisse had halted trading shares in Sulzer, amid uncertainty over the U.S. sanctions on major shareholder Russian billionaire Viktor Vekselberg.

- Barclays suspended “ratings and estimates of United Company Rusal PLC following sanctions being placed on this entity”.

- Russia’s VTB Capital has terminated coverage of EN+ and Rusal with immediate effect, citing changes in the allocation of resources in its research department.

- BMO Capital Markets has suspended coverage of En+ Group until further notice.

- JP Morgan Cazenove said “following the addition of UC Rusal PLC and EN+ Group PLC to the OFAC SDN list, we are moving to Non-Rated on these names.”

- Switzerland-based commodity trader and producer Glencore said it would not “at this time” be swapping its shares in Rusal for Global Depository Receipts in EN+ due to U.S. sanctions on both firms.

Reporting by Claire Milhench; additional reporting by Danilo Masoni, Sujata Rao and Marc Jones; Editing by Hugh Lawson

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