Rogers Commodity ETNs Halt Issuing Of New Shares

April 01, 2009

The Swedish Export Credit Corp. suspended issuance of shares in seven of its ETNs on Tuesday. 


One of the most popular issuers of exchange-traded notes has stopped selling new shares after telling U.S. regulators it plans to restate earnings going back to 2006. 

The Swedish Export Credit Corp., which goes by the acronym SEK and underwrites ETNs with more than $411.3 million in assets, suspended issuance of shares in seven of its products on Tuesday.

The firm's ETN lineup is dominated by its series that tracks different benchmarks designed by famed commodities manager Jim Rogers. 

A note on the Web site that markets the ETNs under the Elements brand name on Wednesday said that the company expects the halting of new shares to be temporary.

Although ETNs (like exchange-traded funds) are issued in large blocks mainly through institutions, the move could impact individual investors. By stopping new issues from hitting the market, the ETNs effectively will trade like closed-end funds.

The impact to smaller investors is that without the ability to allow institutional investors to freely arbitrage shares, the ETNs could theoretically trade at substantial premiums to net asset values. 

The SEK is the third-largest ETN issuer by assets, according to the latest industry data compiled by the National Stock Exchange. It trailed only Barclays and Deutsche Bank, which had at the end of February $2.3 billion and $1.4 billion, respectively, in ETN assets.  

The Elements-branded ETNs impacted include (with latest asset levels):

  • Rogers International Commodity Agriculture ETN (NYSE: RJA), $184.5 million
  • Rogers International Commodity ETN (NYSE: RJI), $177.2 million 
  • Rogers International Commodity Energy ETN (NYSE: RJN), $20.7 million
  • Rogers International Commodity Metal ETN (NYSE: RJZ), $14.1 million
  • MLCX Grains Index ETN (NYSE: GRU), $6.1 million
  • MLCX Biofuels Index ETN (NYSE: FUE), $4.7 million
  • Spectrum Large Cap Sector ETN (NYSE: EEH), $4 million

Last week, SEK notified the Securities and Exchange Commission that it had to adjust its accounting for the past three years. The company, which is run by the Swedish government, said that it needed to restate earnings "in order to correct certain technical errors in the marking to market of a small number of derivative positions, assets and liabilities required to be reported at fair value."

In a filing to the SEC dated March 25, SEK added that it "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."

The filing can be viewed here.

At the Elements site, SEK says the restatement of its financial statements should be complete by the second half of next month.

As of March 31, SEK is halting new issues of the ETNs it underwrites through the Elements platform run through Merrill Lynch. The brand includes products issued by HSBC, Credit Suisse, Deutsche Bank as well as SEK. 

In March, Credit Suisse pulled three of its four ETNs off the New York Stock Exchange, citing a lack of assets. It added that there was no plan at the time to delist its fourth ETN, the Elements Credit Suisse Global Warming ETN (NYSE: GWO).

Last October, five currency Elements also were taken off the NYSE for lack of assets—less than nine months after they had launched. Those were issued by Deutsche Bank, however. (See related story here.)









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