Norwegian forest products company Norske Skog isn’t out of the woods yet, despite what it calls “strong support” for what’s been billed as its “last” recapitalization plan. One of the debt-laden paper producer’s largest creditors has suddenly taken a different path, after initially agreeing to support the recapitalization, and that’s raised the prospect of bankruptcy once again.
The company sent an optimistic statement to the Oslo Stock Exchange Wednesday afternoon, claiming its board and management were “pleased to have received strong support from both secured and unsecured bondholders and shareholders for the proposed recapitalization solution” that was announced last week.
At the same time, however, the company announced that the deadline for creditors to register their official consent to what’s also been called “the final solution” was being extended for another week, until Tuesday October 31. Norske Skog’s chairman, Christen Sveaas, stated that “practically all stakeholders” supported the recapitalization plan, adding, though, that “we will now spend time to ensure (that) the registration and documentation of formal support for the recapitalization occurs.”
To read the full statement, click here (external link to Norske Skog’s own website).
The extension was the eighth in the long-running drama to keep Norske Skog, burdened by heavy debt from an earlier period of international expansion, out of bankruptcy court. The company was careful to note in its statement that “regardless of the outcome of the recapitalization process,” business operations at the company’s seven paper mills “will continue as normal.” A bankruptcy filing isn’t expected to disrupt currently profitable operations, since keeping them going is in the interests of all involved and not least Norske Skog’s roughly 2,500 employees. Sveaas, Norske Skog’s largest shareholder with a 12.8 percent stake, has fought mightily to avoid a bankruptcy, though, because it would wipe out values for many stakeholders and lead to what he’s called a difficult “insolvency process.”
Sveaas’ efforts are now being challenged, with newspaper Dagens Næringsliv (DN) reporting on Thursday that more than just “registration and documentation” are needed to push the rescue plan through. Sven Ombudstvedt, a former Norske Skog CEO who now works as a central adviser for secured creditors in Norske Skog, confirmed to DN that GSO Capital, the bond-holding arm of the large investment fund Blackstone, no longer supports the recapitalization proposal in its current form. He offered no immediate details about GSO Capital’s objections, but they’re clearly a setback for Sveaas and other creditors, both secured and unsecured, that support the plan.
Blackstone, formerly the largest shareholder in Norske Skog, sold off its stake and is now described as one of the most central creditors in the company’s so-called “senior” group that earlier supported the board’s rescue plan. The creditor group holds a large loan valued at EUR 290 million that’s secured by Norske Skog’s paper mills. If a bankruptcy were to occur, they’ll be first in line to take over the company’s operating assets and function as Norske Skog’s new owners.
The company still thinks the rescue plan will succeed and is also expected to use the next week to continue talks with lenders and other creditors to ensure majority support. “We will do our utmost to obtain support for the recapitalization,” Sveaas stated.