The En + plan to lift sanctions (reducing Oleg Deripaska's share of 50%, his resignation from the board of directors of En + and the provision of a majority on the board to independent directors), presented at the end of April, may not be enough for the US Treasury - one of the pitfalls may be the fact that 11 % of the company belong to close relatives of Deripaska.
As of December 31, 2017, Oleg Deripaska himself owned 68.5% of the share capital of En +, follows from the documents of the company studied by RBC (see infographics). 66.08% belong to him through the structures of B-Finance and Basic Element (the "Basic Element" group), according to the annual report of En +. Another 2.4% belongs to Eastern Carriers Trading Limited, follows from the annual document sent by En + to the Jersey Financial Services Commission. This company is also controlled by Deripaska, disclosed En + in the prospectus to an IPO in London in early November 2017.
On April 27, En + (the controlling shareholder of UC Rusal) said that Deripaska "agreed in principle" to reduce its share in the share capital of En + "to below 50%." So En + expects to fulfill the condition of the US Treasury that Deripaska must give up control over Rusal, so that the company is excluded from the Sanctions list of the SDN (Specially Designated Nationals).
Family share
However, an additional 11.4% of En + shares belong to Deripaska's family members, and the sanction unit of the US Finance Ministry OFAC will take into account this fact, experts are sure, interviewed by RBC. "Of course, OFAC in this case will consider the shares of Deripaska himself and his family as a whole and definitely will not accept the situation when Deripaska, for example, will reduce its share to 40%, and 11% will remain with his relatives," the partner of the international law firm Dentons Artem Zhavoronkov.
As of January 1, 2018, 5.8% of En + shares belonged to the wife of Deripaska Polina and 1.75% - his father-in-law Valentin Yumashev, follows from the report of En + Group, filed in late February, the Commission on Financial Services of Jersey. The annual report of En + on IFRS, published on April 30, does not report any changes in the composition of shareholders since the beginning of the year. In addition, 1.84% at the beginning of the year belonged to Eclipse Star Holdings and 1.99% to Orandy Capital (both from the British Virgin Islands, where the beneficiaries are anonymous). From the prospectus IPO En + it follows that these structures belong to some members of the family of Oleg Deripaska.
Wife with an asset
Polina Deripaska received a 6.9% stake in En + in October 2017, disclosed the company in the prospectus to the IPO, without explaining the reasons for such a gift. The document said that before the IPO, a 13% stake in En + belonged to "the companies of Oleg Deripaska's family or directly to his family" (including 6.9% of Polina Deripaska), and after placement, the "family" share blurred to 11.4%.
Oleg and Polina Deripaska got married in 2001, but, according to media reports, have not been living together lately. Nevertheless, their divorce or divorce was not reported. From the package, Polina transferred 1.373 million shares (0.24%) to Orandy. The couple have two children - Peter and Maria.
Polina Deripaska was supposed to figure in the secret part of the "Kremlin report" of the United States (its open part appeared at the end of January 2018). Under the CAATSA Sanctions Act, the report should contain information on "the financial status and known sources of income of the" oligarchs "and their families (including their wives)."
The US Treasury will necessarily take into account the fact that Deripaska's relatives own 11% of En +, says the former senior adviser of OFAC, Brian O'Toole. "Rotenbergs are a good example of how OFAC perceives family members [under the sanction, first came the Rotenberg brothers, and then their children. - RBC]. OFAC in most cases does not consider close relatives independent of individuals SDN, "- says the expert.
O'Toole expects that OFAC may require that Deripaska sell more shares of En + or that his relatives withdraw from the company's capital.
80% of shares are toxic
The US Treasury has already made it clear that it will not be enough to simply cut Deripaska's stake below 50% in En +, so that OFAC will agree to exclude Rusal from the sanctions list. "I even have doubts that OFAC will be satisfied with the situation when Deripaska and his family will own less than 50% (now Deripaska and his relatives have almost 80%). In the spirit of the OFAC statement on the possibility of lifting the sanctions, it was a very significant reduction in the share of Deripaska (to the status of one of the minority shareholders) or a complete withdrawal from the capital, "argues Zhavoronkov.
O'Toole also recalls that in the CAATSA Sanctions Act, restrictions apply to relatives of individuals on the SDN list: Article 228 of this law effectively prohibits companies and citizens outside the United States from assisting in carrying out "significant transactions" for children, parents, spouses and brothers / sisters of the SDN. In other words, Deripaska's wife will find it difficult to benefit from owning shares in En +.
Oleg Deripaska has a call option to buy out part or all of his wife's package, reported in the En + prospectus to the IPO. At that, 180 days, during which Polina Deripaska did not have the right to sell her share (the so-called lock-up period), expired on May 2, 2018.
The representative of En + declined to comment, in particular, refused to specify whether Deripaska retained an option to buy back his wife's share. Polina Deripaska did not respond to RBC's request that she intend to sell her share. The representative of Rusal redirected questions to shareholders. The US Treasury did not respond to RBC.
Who will buy a stake?
The question remains, who can buy the stake of Deripaska and, possibly, his relatives. On May 3, the Financial Times reported that En + has already noticed the initial interest of potential investors, among which there are unnamed international companies. But analysts interviewed by RBC doubt the prospects for the deal. Analyst "Alor Broker" Alexei Antonov notes that all potential buyers of the package either are already under sanctions, or actively struggle with the risks of inclusion in the SDN list and in every possible way avoid transactions with "toxic" companies. In Antonov's view, if the deal takes place, it will be a "decoupage in the spirit of deus ex machina, when after a series of refutations the control will still be handed over to the state."
"The transaction price, most likely, will not have anything to do with the market. First, the current market price of En + is almost half the fair price and it has become such because of the introduction of sanctions, if sanctions are withdrawn as a result of the transaction, then the price should take this fact into account. If the buyer or one of them is selected "from the outside," the asset will be sold at a discount of 15-20% to the pre-sale value of the asset. If the buyer is a person representing the interests of the state, then, of course, there is no need to talk about any market mechanisms for pricing, "Antonov said.
En + can be bought by large Russian state-owned banks - VTB or Sberbank (VTB Capital holds about 11% of En + shares owned by Deripaska, Sberbank is the company's largest lender), says Maxim Khudalov, director of corporate ratings at ACRA. "The transaction price is unlikely to be pre-authorized and will likely be at the level of average quotations for the last month," the expert suggests. "I expect that OFAC will continue to pressure the company, as the goal is to knock out a strong competitor from the US market and spoil the lives of Europeans," Khudalov said. Representatives of Sberbank and VTB declined to comment.
Sanctions experts previously told RBC that OFAC may require that Deripaska not receive any money from the sale of a stake in En + and that this money be transferred to an account for the account of blocked funds or donated to charity.
As of December 31, 2017, Oleg Deripaska himself owned 68.5% of the share capital of En +, follows from the documents of the company studied by RBC (see infographics). 66.08% belong to him through the structures of B-Finance and Basic Element (the "Basic Element" group), according to the annual report of En +. Another 2.4% belongs to Eastern Carriers Trading Limited, follows from the annual document sent by En + to the Jersey Financial Services Commission. This company is also controlled by Deripaska, disclosed En + in the prospectus to an IPO in London in early November 2017.
On April 27, En + (the controlling shareholder of UC Rusal) said that Deripaska "agreed in principle" to reduce its share in the share capital of En + "to below 50%." So En + expects to fulfill the condition of the US Treasury that Deripaska must give up control over Rusal, so that the company is excluded from the Sanctions list of the SDN (Specially Designated Nationals).
Family share
However, an additional 11.4% of En + shares belong to Deripaska's family members, and the sanction unit of the US Finance Ministry OFAC will take into account this fact, experts are sure, interviewed by RBC. "Of course, OFAC in this case will consider the shares of Deripaska himself and his family as a whole and definitely will not accept the situation when Deripaska, for example, will reduce its share to 40%, and 11% will remain with his relatives," the partner of the international law firm Dentons Artem Zhavoronkov.
As of January 1, 2018, 5.8% of En + shares belonged to the wife of Deripaska Polina and 1.75% - his father-in-law Valentin Yumashev, follows from the report of En + Group, filed in late February, the Commission on Financial Services of Jersey. The annual report of En + on IFRS, published on April 30, does not report any changes in the composition of shareholders since the beginning of the year. In addition, 1.84% at the beginning of the year belonged to Eclipse Star Holdings and 1.99% to Orandy Capital (both from the British Virgin Islands, where the beneficiaries are anonymous). From the prospectus IPO En + it follows that these structures belong to some members of the family of Oleg Deripaska.
Wife with an asset
Polina Deripaska received a 6.9% stake in En + in October 2017, disclosed the company in the prospectus to the IPO, without explaining the reasons for such a gift. The document said that before the IPO, a 13% stake in En + belonged to "the companies of Oleg Deripaska's family or directly to his family" (including 6.9% of Polina Deripaska), and after placement, the "family" share blurred to 11.4%.
Oleg and Polina Deripaska got married in 2001, but, according to media reports, have not been living together lately. Nevertheless, their divorce or divorce was not reported. From the package, Polina transferred 1.373 million shares (0.24%) to Orandy. The couple have two children - Peter and Maria.
Polina Deripaska was supposed to figure in the secret part of the "Kremlin report" of the United States (its open part appeared at the end of January 2018). Under the CAATSA Sanctions Act, the report should contain information on "the financial status and known sources of income of the" oligarchs "and their families (including their wives)."
The US Treasury will necessarily take into account the fact that Deripaska's relatives own 11% of En +, says the former senior adviser of OFAC, Brian O'Toole. "Rotenbergs are a good example of how OFAC perceives family members [under the sanction, first came the Rotenberg brothers, and then their children. - RBC]. OFAC in most cases does not consider close relatives independent of individuals SDN, "- says the expert.
O'Toole expects that OFAC may require that Deripaska sell more shares of En + or that his relatives withdraw from the company's capital.
80% of shares are toxic
The US Treasury has already made it clear that it will not be enough to simply cut Deripaska's stake below 50% in En +, so that OFAC will agree to exclude Rusal from the sanctions list. "I even have doubts that OFAC will be satisfied with the situation when Deripaska and his family will own less than 50% (now Deripaska and his relatives have almost 80%). In the spirit of the OFAC statement on the possibility of lifting the sanctions, it was a very significant reduction in the share of Deripaska (to the status of one of the minority shareholders) or a complete withdrawal from the capital, "argues Zhavoronkov.
O'Toole also recalls that in the CAATSA Sanctions Act, restrictions apply to relatives of individuals on the SDN list: Article 228 of this law effectively prohibits companies and citizens outside the United States from assisting in carrying out "significant transactions" for children, parents, spouses and brothers / sisters of the SDN. In other words, Deripaska's wife will find it difficult to benefit from owning shares in En +.
Oleg Deripaska has a call option to buy out part or all of his wife's package, reported in the En + prospectus to the IPO. At that, 180 days, during which Polina Deripaska did not have the right to sell her share (the so-called lock-up period), expired on May 2, 2018.
The representative of En + declined to comment, in particular, refused to specify whether Deripaska retained an option to buy back his wife's share. Polina Deripaska did not respond to RBC's request that she intend to sell her share. The representative of Rusal redirected questions to shareholders. The US Treasury did not respond to RBC.
Who will buy a stake?
The question remains, who can buy the stake of Deripaska and, possibly, his relatives. On May 3, the Financial Times reported that En + has already noticed the initial interest of potential investors, among which there are unnamed international companies. But analysts interviewed by RBC doubt the prospects for the deal. Analyst "Alor Broker" Alexei Antonov notes that all potential buyers of the package either are already under sanctions, or actively struggle with the risks of inclusion in the SDN list and in every possible way avoid transactions with "toxic" companies. In Antonov's view, if the deal takes place, it will be a "decoupage in the spirit of deus ex machina, when after a series of refutations the control will still be handed over to the state."
"The transaction price, most likely, will not have anything to do with the market. First, the current market price of En + is almost half the fair price and it has become such because of the introduction of sanctions, if sanctions are withdrawn as a result of the transaction, then the price should take this fact into account. If the buyer or one of them is selected "from the outside," the asset will be sold at a discount of 15-20% to the pre-sale value of the asset. If the buyer is a person representing the interests of the state, then, of course, there is no need to talk about any market mechanisms for pricing, "Antonov said.
En + can be bought by large Russian state-owned banks - VTB or Sberbank (VTB Capital holds about 11% of En + shares owned by Deripaska, Sberbank is the company's largest lender), says Maxim Khudalov, director of corporate ratings at ACRA. "The transaction price is unlikely to be pre-authorized and will likely be at the level of average quotations for the last month," the expert suggests. "I expect that OFAC will continue to pressure the company, as the goal is to knock out a strong competitor from the US market and spoil the lives of Europeans," Khudalov said. Representatives of Sberbank and VTB declined to comment.
Sanctions experts previously told RBC that OFAC may require that Deripaska not receive any money from the sale of a stake in En + and that this money be transferred to an account for the account of blocked funds or donated to charity.
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