Creditors unite to save Norske Skog

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Norway’s debt-plagued but profitable paper producer Norske Skog was saved from a bankruptcy filing this week, after various groups of creditors finally agreed on a rescue plan. Secured and unsecured creditors have joined shareholders on a “consensual solution” to recapitalize and refinance the company, and bring an end to years of uncertainty.

Norske Skog’s plant at Skogn in Trøndelag is one of the largest paper producers in Europe. PHOTO: Norske Skog

Newspaper Dagens Næringsliv (DN) reported Wednesday that the agreement provides unsecured lenders with “a bit more” than they would have received in the board’s last rescue plan, and that shareholders and secured creditors will get a bit less.

Details of the so-called “final solution” for the forest products company that means a lot to Norway’s timer industry can be found here (external link), in the company’s own account of the agreement.

“Both the board and management are extremely satisfied that we have succeeded in uniting the main creditors in a consensual solution that’s good for everyone involved,” investor Christen Sveaas, a major shareholder himself who recently took over as chairman of the board, wrote in an email to DN. Sveaas added that the agreement “definitely provides the foundation for ongoing operations of the company in its current form.”

Norske Skog, which specializes in the production of newsprint and magazine paper, has 2,500 employees around the world, with 940 of them in Norway. Even though the company’s remaining plants in Norway and elsewhere are profitable, the company has been in crisis for years because of heavy debt acquired during a major international expansion that began in the late 1990s.

Even if the company had gone into bankruptcy, it was widely viewed that it was in everyone’s interests to keep the company operating. Sveaas has stressed, though, how a bankrupcty would leave creditors and shareholders with “significantly less value” and with “rather complicated insolvency processes.”

Sveaas, who owns timberland in Norway himself and has what some have called “a heart for the business,” was viewed as the most likely saviour for the company. He had even gone on national television last week, urging creditors and shareholders to accept what was billed as a last-ditch effort to save the company from bankruptcy.

Investors seemed to be cheering the new rescue plan, with shares jumping more than 40 percent on the Oslo Stock Exchange after the agreement was announced Wednesday morning. All creditors have until October 25 to accept the rescue plan, with approval needed from 75 percent of them.

Norske Skog’s board currently has support from more than 50 percent of the unsecured bondholders. More than 80 percent of secured creditors also support the plan.

newsinenglish.no/Nina Berglund