Last checked at 27 Jul 2017 14:50
ETFS Commodity Securities Limited
LEI: 21380068Q1JSIAN4FO63
27 July 2017
ETFS Commodity Securities Limited
ETFS Classic and Longer Dated Commodity Securities
ETFS Short and Leveraged Commodity Securities
Collateral Changes
ETFS Commodity Securities Limited ("CSL" or the "Issuer") announces that it has agreed with Merrill Lynch Commodities, Inc. ("MLCI") certain changes (the "MLCI Agreement Changes") to the existing Facility Agreements and Security Agreement between CSL and MLCI as described below.
As announced by the Issuer on 3 July 2017, subject as described therein and with effect from the Effective Date (such date as may be specified or determined in accordance with the terms of a further announcement to be made by the Issuer but not being less than 30 days from 3 July 2017), the obligations of MLCI in respect of Commodity Contracts entered into pursuant to its Facility Agreements will be assumed by Merrill Lynch International ("MLI"). The MLCI Agreement Changes are consistent with the equivalent provisions that will apply to MLI following such assumption and will become effective on 1 September 2017 unless the assumption of MLCI's obligations in respect of its Commodity Contracts by MLI has by then occurred. The Trustee has consented to these changes, on the basis that they are (a) necessary or desirable to comply with a statutory or other requirement of law and (b) necessary or desirable and not materially prejudicial to the rights of Security Holders.
Changes applicable from 1 September 2017
As described in the Issuer's announcement of 3 July 2017, as a result of changes in the regulation of OTC derivative contracts, MLCI as Commodity Contract Counterparty will become subject to an obligation in relation to its Commodity Contracts to post and collect variation margin, complying with specific requirements as to eligibility and subject to certain "haircuts". These obligations arise from 1 September 2017 and the Issuer and MLCI have agreed changes to the Security Agreement so as to comply with these requirements.
MLCI will also from 1 September 2017 be subject to a technical requirement to collect variation margin in relation to Commodity Contracts prior to payment therefor and in order to address this, MLCI and the Issuer have agreed amendments to the Facility Agreements between MLCI and the Issuer to include an acknowledgment by MLCI that payment of a Creation Amount in respect of any Commodity Contract (whether by payment in cash or by set-off) will extinguish any requirement of the Issuer to provide variation margin and agreement that any failure to provide such variation margin will not constitute a breach of the relevant Facility Agreement. The only remedy available to MLCI for a failure to provide such variation margin (which can only arise due to a failure by an Authorised Participant to make payment of the Creation Amount in respect of the equivalent Commodity Security) will be the termination of the relevant Commodity Contract for which payment has not been made. In such event (and without prejudice to any payments that may be required to be made between the relevant Commodity Contract Counterparty and Authorised Participant pursuant to a Direct Agreement), the relevant Commodity Securities applied for will not be issued.
Copies of the amendment agreements are available free of charge from ETFS Management Company (Jersey) Limited, Ordnance House, 31 Pier Road, Jersey JE4 8PW.
Terms used in this announcement and not otherwise defined bear the meanings given, in relation to the ETFS Classic and Longer Dated Commodity Securities, in the prospectus of the Issuer dated 12 April 2017 and in relation to the ETFS Short and Leveraged Commodity Securities, in the prospectus of the Issuer dated 6 September 2016.
For further information, please contact:
Ciaran Hocking
R&H Fund Services (Jersey) Limited
Tel: +44 (0) 1534 825200
Fax: +44 (0) 1534 825335
E-mail address: etfsjersey@rhfsl.com