U.S. Sanctions Take a Toll on Rusal Shares
09 Abril 2018 - 11:00AM
Dow Jones News
By James Marson and Scott Paterson
MOSCOW -- Shares in United Co. Rusal, one of the world's largest
aluminum producers, lost half their value Monday, as the effect of
U.S. sanctions on Russian companies and the tycoons that own them
rippled across markets around the world.
Investors sold off Rusal shares in Hong Kong amid uncertainty
over how the sanctions may affect the company's ability to trade
with counterparties. The stock finished down 50.4%.
That uncertainty, meanwhile, drove up aluminum prices -- up more
than 3% early Monday. London commodities broker SP Angel estimates
Rusal's primary aluminum output last year accounted for about 6% of
global production and 14% of production excluding China.
The company said in a filing that U.S. sanctions "may result in
technical defaults in relation to certain credit obligations" and
that it was evaluating the impact of any such defaults on the
company's financial position.
Rusal was one of 12 companies, owned by seven Russian tycoons,
that the U.S. government sanctioned Friday over what Treasury
Secretary Steven Mnuchin called Russia's "malign activity" around
the world, including military interventions in Ukraine and Syria
and cyberattacks. A Kremlin spokesman on Monday called the measures
unlawful and said that the government was analyzing them and
preparing a response.
Rusal's main owner, Oleg Deripaska, was also specifically named
in U.S. sanction Friday. Mr. Deripaska on Friday called the
measures against him "baseless, ridiculous and absurd," a
representative told Russian news agencies.
En+ Group, a London-listed company that is majority owned by Mr.
Derispaska and holds a 48% stake in Rusal, as well as power
companies in Russia, said it was "highly likely" that the sanctions
would be would hurt its business. En+ shares fell more than 34% on
Monday after a brief trading suspension.
Western firms that have joined up with Russian firms now on the
sanctions list also were assessing new risks. Swiss engineer Sulzer
AG said it had agreed to buy shares from its main owner, Renova
Holdings, which appeared on the sanctions list along with its
chairman Viktor Vekselberg, to comply with the sanctions.
Swiss based mining and trading giant Glencore PLC holds a nearly
9% stake in Rusal. Glencore Chief Executive Ivan Glasenberg has
been a Rusal board member since 2007. It is unclear if the
sanctions directly affect that shareholding. Glencore declined to
comment. Shares in the firm were down 3% in London trading.
The new U.S. restrictions make it all but impossible for Rusal
and other sanctioned firms to do business in dollars, analysts
said, raising questions about their banking and trading
relations.
The U.S. government said that non-U.S. citizens may face
sanctions for "facilitating significant transactions" for
sanctioned individuals or entities. That could make activities as
simple as exchanging currencies more expensive for Rusal, given the
international scope of its operations and the fact that sales are
priced in U.S. dollars, said Edward Sterck, an analyst at BMO
Capital Markets.
Timothy Ash, an analyst at BlueBay Asset Management in London,
said the sanctions list would hurt the Russian economy, and that
its unpredictability was its strength. "Now, no one in the top 100
list (of wealthiest Russians) can be sure they won't be subject to
sanctions," he said.
Mr. Ash said that banks will be even more cautious about lending
to Russian companies, which will hamstring economic growth that is
already weak.
The Russian government said it would provide support to
companies that had been sanctioned, without giving any details. "We
are very attentive to our leading companies and their large
workforces, very important jobs for our country," said Deputy Prime
Minister Arkady Dvorkovich, Interfax news agency reported.
Write to James Marson at james.marson@wsj.com
(END) Dow Jones Newswires
April 09, 2018 09:45 ET (13:45 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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