Swedish Export Credit Corp., also known as “SEK”, announced it will not issue new shares of any ELEMENTS ETNs until after the filing of its 20-F (annual report), which is expected to occur in late April. On March 25, 2009, SEK filed notice with the SEC that it will be restating earnings for 2006 and 2007. The issuance halt is a result of SEC requirements regarding the age of audited financial statements. “The company does not believe that the restatement will have any effect whatsoever on its ability to service its outstanding debt and other obligations, nor does SEK expect that it will have any impact on its credit ratings.”
Without the ability to issue new shares, the seven Elements ETNs issued by SEK will not be able to track their indicative value and are likely to trade at a premium. There is also a possibility they could trade at a discount, especially if investors grow concerned about SEK’s credit rating. They will essentially be trading as closed-end funds. The seven affected products are:
- Elements MLCX Biofuels ETN (FUE)
- Elements MLCX Grains Total Return ETN (GRU)
- Elements Rogers ICI Agriculture ETN (RJA)
- Elements Rogers ICI Commodity Total Return ETN (RJI)
- Elements Rogers ICI Energy ETN (RJN)
- Elements Rogers ICI Metals ETN (RJZ)
- Elements Spectrum Large Cap US Sector Momentum ETN (EEH)
The Elements family of ETNs is unique in that the products are provided through multiple issuers. However, this is not the first time that one of the issuers has stopped issuing new shares. Last November, HSBC quit issuing the five currency-based Elements ETNs. More recently, Credit Suisse quit issuing new shares for three of the four ETNs they sponsor. Most of the Elements ETNs are on our ETF Deathwatch, including four of the top five positions in our soon to be released April edition.
We recommend investors avoid all Elements brand exchange traded products.