Oleg Deripaska, billionaire and president of United Co. Rusal. (Photographer: Andrey Rudakov/Bloomberg)

U.S. Gives Investors More Time to Divest From Rusal, En+

(Bloomberg) -- The U.S. Treasury Department extended until June 6 the deadline for investors to comply with sanctions on Russian billionaire Oleg Deripaska and his companies En+ and Rusal, seeking to reduce disruption to financial markets.

The action removes the immediate threat that Deripaska’s holding company, En+ Group Plc, will be de-listed from the London Stock Exchange, a step that had been scheduled for Wednesday. The Treasury had previously given investors with a U.S. presence a deadline of May 7 to divest from the companies.

The U.S. authorized transactions necessary to divest or transfer debt in aluminum giant United Company Rusal Plc, En+ and GAZ Group by stakeholders with 50 percent or more until June 6, Treasury said in a general license issued late Tuesday. The clarification from Treasury is common after broad sanctions are issued, and do not signal any easing in penalties imposed, experts said.

Treasury’s move on Tuesday should be regarded as “routine maintenance” of broad sanctions that the government needs help from the private sector to impose, said Brian O’Toole, a former senior adviser in Treasury’s sanctions unit and now a senior fellow at the Atlantic Council. “Rusal is a big target and the sanctions were broad -- sanctions programs like this often need to be clarified many times.”

The department may need to provide market participants even more time to comply with sanctions, he said. “What they’ll try to do is give enough general licenses to let the problems take care of themselves on a broad scale, and then consider specific licenses.”

Election Meddling

Treasury targeted Deripaska as part of a sanctions package last month that hit Russian tycoons, companies and key allies of Russian President Vladimir Putin for the Putin government’s alleged meddling in the 2016 U.S. presidential election.

The sanctions, announced April 6, have fueled chaos in the global supply chain for aluminum. The metal initially surged as the U.S. sanctions fanned fears of a shortage, and then prices collapsed last week as signs emerged of a possible resolution. Deripaska controls Russia’s largest aluminum producer, United Co. Rusal, through a majority holding in En+.

In an interview earlier this week, Treasury Secretary Steven Mnuchin said that the administration had no desire to put Rusal out of business and said discussions with the company were “encouraging.” Deripaska has proposed resigning from the board of En+ and reducing his stake in a bid to end the threat posed to Rusal under sanctions.

Irish Subsidiary

Three weeks after the sanctions were announced, Treasury said it would provide Rusal relief if Deripaska relinquished control.

The general license the Treasury issued Tuesday now includes Rusal Capital DAC, an Irish subsidiary that issued $1.6 billion of dollar-denominated bonds. That opens the way for the largest bond clearinghouses Euroclear and Clearstream to start settling trades. An earlier license didn’t explicitly include Rusal’s Irish subsidiary.

Clearstream is now preparing to start facilitating settlements of affected securities, a Frankfurt-based spokeswoman confirmed by email on Wednesday. Euroclear said in a statement on Wednesday that it’s updated its manual processes to fulfill requirements of the general license after the Treasury extended the exemption period. It declined to comment on individual securities.

"The revised general license finally gives U.S. investors a chance to sell the bonds,” said Pavel Mamai, co-founder of hedge fund Promeritum Investment in London. “It should also allow investors to wrap up other trades, like closing shorts.”

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