Norske Skog finally secures temporary refinancing

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Debt-laden Norske Skog announced Monday it had secured a loan agreement from some of its own creditors for EUR 16 million that will allow it to keep its profitable operations going while it goes through a major recapitalization. At the same time, however, the forest products company warned that profits would be lower than expected.

Negotiations continue on a long-term solution for Norske Skog, a major paper producer that ran into trouble after major expansion abroad. In a message to the Oslo Stock Exchange, the company’s CEO Lars Sperre said he was “satisfied” that “key stakeholders” were “willing to support our competitive business  operations” with the so-called “liquidity facility.” Combined with the cash flow from operations, Norske Skog can thus stay in business while it keeps trying to recapitalize.

Sperre told newspaper Dagens Næringsliv (DN) that the company’s problem remains its debt, which is “too big” and means that “too much of the cash flow goes towards paying interest and not to developing the business.” All efforts will now go towards finding a longterm, sustainable solution for the company, he said.

While the loan agreement is good news for Norske Skog, the company also faces weak markets for its magazine- and other paper products. That, combined with changes in currency valuation and higher energy costs, prompted the company to warn that its gross operating result was likely to decline from an expected NOK 800 million this year to NOK 700 million. In July the company had predicted profits of as much as NOK 947 million. staff