Norske Skog jumps on new rescue plan

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Investors seemed to like a “last chance” rescue plan for Norske Skog that was presented by its board of directors Wednesday afternoon. After numerous postponements, announcement of the new plan sent shares in the debt-plagued forestry firm up 25 percent.

Newspaper Dagens Næringsliv (DN) reported that the board’s new proposal for recapitalizing Norske Skog  is its “final” plan for rescuing the company. If it’s not accepted by creditors with in a week, Norske Skog chairman Christen Sveaas said the company will probably file for bankruptcy.

“This is our last proposal, guaranteed,” Sveaas told DN. “We have worked hard to reach a reunited solution that everyone involved can support. I believe that the proposal presents a good compromise, and that all involved have reason to be appropriately dissatisfied.”

See the text of the board’s “final recapitalization plan” here (external link).

Approval is demanded from at least 75 percent of those holding debt and 90 percent of shareholders. The company reported that a majority of secured creditors support the plan, but support from unsecured creditors in the so-called “junior” group was uncertain.

Sveaas urged “all stakeholders” to support the recapitalization proposal, since “all other alternatives will entail less value and complicated insolvency processes.” It involves issuance of a new loan to be backed by “senior” secured creditors, some of which would be secured with shares for the rest. The “junior” creditors can join in if they collectively provide EUR 50 million in new capital. A deadline for approval was set for next Thursday at 5pm Oslo time.

“The secured creditors have no patience left whatsoever,” Sveaas said. “It’s the board that has restrained the ‘seniors’ (from filing for bankruptcy, where they alone could lay claim to their secured assets) and made sure that all involved were around the negotiating table, but now their patience has run out.”

Meanwhile the company that’s teetering on the verge of bankruptcy also issued a new warning that its results were likely to be even weaker than already expected. Operating profits are now expected to be around NOK 710 million for the year,, down from the NOK 800 million predicted at the end of August and NOK 947 million in mid-July.

Norske Skog also dampened its outlook for the years ahead. It now expects operating profits of around NOK 850 million next year and in 2019. Annual revenues are expected to remain at around NOK 12 billion.

The company cited the effects of a stronger Norwegian krone that will reduce earnings by about NOK 30 million despite higher sales volume. Gross operating results were also expected to fall in the company’s Australasia region from NOK 77 million to around NOK 40 million on unchanged sales volume.

Norske Skog remains a generally profitable company but it’s burdened by heavy debt acquired during earlier years of expansion abroad. Even if the company goes into bankruptcy, its paper-producing plants are expected to continue operating while a court-supervised reorganization of the company is worked out. Berglund