UPDATED: One of the most important groups of creditors at debt-laden forestry firm Norske Skog has seized control of the company’s production plants. They’ve also cleared the way for the return of former Norske Skog boss, Sven Ombudstvedt, and caught the company’s widely viewed saviour, Christen Sveaas, by surprise. Sveaas and the company’s newly elected board of directors intend to continue working on their own company rescue plan.
Drama continued to surround Norske Skog this week after the lender group lost patience with debt negotiations that have dragged on for months between shareholders and creditors. Newspaper Dagens Næringsliv (DN) reported that now the five biggest funds that have lent Norske Skog money are taking control of seven production plants that have contributed to keeping the company’s operations profitable, even as it drowns in debt from an earlier international expansion program.
“It has taken too much time to get a solution in place,” declared Ombudstvedt in DN’s account on Wedneday of the latest turn of events at Norske Skog. He said that “out of consideration” for the operating entities at Norske Skog, the secured creditors are now taking over and naming him as chairman, to help keep the plants operating “without problems.”
Ombudstvedt generated more headlines himself earlier this year when he sold his own shares in the company, criticized creditors, obtained the board’s confidence in his work but then resigned as chief executive. Now he’s back, as a representative for the lenders and leader of the board of a “new” Norske Skog. The lenders reportedly expect him to to take an active role in operations as well, if necessary.
Plans include the establishment of a new holding company that will own shares and the company’s seven plants. Ombudstvedt said the lenders were ready to take over the plants and run them to add to the company’s liquidity. “We want the operative entities to have a new balance sheet and debt situation, so we can concentrate on operations and developing the company,” he told DN. The plants are among the assets that secured the funds’ financing. Existing shares in the “old” Norske Skog will likely be wiped out.
The plans were announced just after Norske Skog’s existing board, now led by Norwegian investor and forest owner Christen Sveaas, had announced its own intention to unveil a refinancing plan for the company on Monday. Sveaas boosted his holdings in Norske Skog and was elected chairman just a few weeks ago. He was seen as the one to rescue Norske Skog and its 2,500 employees in Norway from bankruptcy.
Sveaas has instead ended up among those surprised by the lenders’ move that seems to pre-empt Sveaas’ own move to unveil plans for “a robust industrial and financial platform for ongoing development of the company.” Sveaas, Norske Skog’s biggest shareholder who stands to see his shares’ value wiped out, confirmed to DN that the secured creditors’ move came as a surprise.
“What they’re doing now should have been done many months ago,” Sveaas wrote in an email to DN. He noted that the board of directors he leads has only been in place for around three weeks, and he can’t see how they could have come up with their own workout plan any quicker.
He wrote that for the company itself, the most important thing is to secure refinancing with a “solid balance sheet” and to bring a sense of calm around the long-troubled company. Sveaas was not critical towards Ombudstvedt either: “Ombudstvedt knows the company and the industry, so he’s surely an excellent man.”
Sveaas and other shareholders are left facing losses on their investment in the company.They include some well-known investors in Norway such as automobile import heir Bertel Otto Steen, his brother Carl Steen and a former chairman of Norske Skog who leads the shipbroking and investment company Astrup Fearnley, Jon-Aksel Torgersen.
Sveaas told DN on Thursday, though, that he and the rest of Norske Skog’s board view the creditors’ attempt to take over the company as “uncertain and complicated.” They intend to continue working on their own rescue plan for the company. Sveaas said the secured creditors have a right to step in “and those of us on the board have full respect for that. But it is a lengthy, uncertain and complicated process for all involved.”
Longing for long-term owners
Ombudstvedt said the lender group now taking over operations was willing to boost liquidity at the company and it urged the board the Sveaas leads to cooperate. The lender group has already begun the formal process of taking over Norske Skog.
An employees’ representative, Paul Kristiansen, was also surprised by the secured creditors’ decision to take control of the company’s profitable assets. “I can understand that they want to secure themselves, but don’t see what they’ll get out of the company,” he told.
Asked whether he thought the creditors were rescuing the company he was he was unsure. “I don’t see the company biggest lenders as long-term industrial developers,” he told DN. “This will be exciting. I would preserve more long-term Norwegian owners.” He called Sveaas “an inustrialist” whose company, Kistefos, was “solid.” He said he had “no problems with him (Sveaas) taking over the company,” because “Norwegian, long-term owners are the best for all involved.”