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Wednesday, April 24, 2024

More surprises in Norske Skog saga

The ongoing saga of debt-laden forest products company Norske Skog took a new turn on Thursday, after an investment arm of Norwegian industrial firm Aker teamed up with hedge fund Oceanwood Capital Management to bid for Norske Skog’s paper plants, which still have profitable operations. Norske Skog’s board responded Thursday afternoon, as the company’s shares fell to a record low level, that they’d now “likely” file for bankruptcy after trying to ward off insolvency for months.

Drama continues at Norske Skog’s headquarters here at Skøyen in Oslo. PHOTO: Norske Skog

It had gone quiet around Norske Skog recently, while its chairman Christen Sveaas and management kept trying to negotiate a “consensual” recapitalization agreement with its shareholders. Sveaas and the company’s board claimed such an agreement was now “unlikely to be achievable” and that parent company Norske Skogindustrier ASA “is likely to initiate insolvency proceedings.” Its share price, already down by 60 percent, tumbled to just NOK 0.26 Thursday afternoon, not long after the company also reported third-quarter operating earnings of NOK 143 million but a net loss of NOK 9 million.

Sveaas, who ranks as the company’s largest shareholder and took on the chairmanship’s role last summer in an effort to save the company, claimed the board would “continue to safeguard the interest of all its stakeholders through the recapitalization process” and maintain business as usual. All of Norske Skog’s seven paper mills would continue operating as they have all along. Since they remain profitable, it’s in everyone’s best interests, also now Aker’s and Oceanwood’s, that they continue to create value for the company. Its problems stem not from troubled operations but from heavy old debt incurred during an international expansion in the 1990s and 2000s.

The board also stressed that Norske Skog’s “customers, suppliers and other business partners will continue to receive high quality products” and service without interruption.

It seemed as though the surprise interest from Aker Capital AS, part of industrialist Kjell Inge Røkke’s Aker firm, and Oceanwood was not being greeted as a hostile takeover attempt. Christen and the board stated in an “update” Thursday afternoon that they were “pleased that Aker, with its strong industrial knowledge and financial expertise, has taken a role together with Oceanwood in the recapitalization of the Norske Skog group.” Oceanwood, though, has been among Norske Skog’s biggest creditors and therefore seems to have chosen Aker over Sveaas and his rescue program.

Norwegian industrialist Kjell Inge Røkke (right) and his chief executive officer at the Aker group of companies he controls, Øyvind Eriksen, have suddenly emerged as major players in the drama around Norske Skog. PHOTO: Aker Drilling

Øyvind Eriksen, chief executive of Aker ASA, told reporters after its own earnings presentation Thursday that Aker officials had been following the situation at Norske Skog for several years. Dagens Næringsliv (DN) quoted him as saying “we have waited a long time for this opportunity” to buy Norske Skog’s major assets. He claimed the intention of Aker’s and Oceanwood’s offer (which involves forming a separate company called Bidco to bid for the paper mills in an auction process) was “to secure ongoing operations” of the company and make it “bigger and stronger.”

Eriksen noted that the majority of Norske Skog’s employees and assets are in the “operative entities” that are now due to be sold. “For Oceanwood and Aker, it’s important to ensure continuity and predictability for the operative units,” Eriksen told NRK. “That applies also to the jobs tied to them.”

There’s no question, though, that Aker, its major shareholder Røkke and the funds managers at Oceanwood also see a chance to make more money off the ruins of Norske Skog. Eriksen couldn’t guarantee that all jobs would be preserved, “but our wish and our ambition is to build up a bigger and stronger Norske Skog, not scale it down.”

Eriksen also noted that the company’s debt has been its biggest problem, but he’s convinced it’s possible to make Norske Skog profitable in the future. “There will still be demand for Norske Skog’s products,” Eriksen said. “It’s all about producing at the lowest possible cost.”

Investor and philanthropist Christen Sveaas has a fondness for forestry and has been viewed as Norske Skog’s saviour, but now may be on his way out. PHOTO:

Major changes loom, though, with newspaper Dagens Næringsliv’s commentator Thor Chr Jensen reporting that Norske Skog “ain’t big enough” for both Røkke and Sveaas, who both rank among Norway’s most high-profile and successful business tycoons and investors. Jensen also noted that while Røkke and Aker have never been involved in Norske Skog earlier, Oceanwood is one of the biggest creditors of Norske Skog’s secured loans.

The dive in Norske Skog’s share price and Thursday’s bad news also probably means Sveaas and other shareholders have lost everything. “Røkke and Aker coming in to Norske Skog means Sveaas is on his way out,” predicted Jensen. “It’s quite difficult, if not impossible, to see any cooperation between the two.” Berglund



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