The board of the parent company for Norway’s long-troubled forestry firm Norske Skog finally bowed to the chopping block on Tuesday. Their decision to declare Norske Skogindustrier AS insolvent and file for bankruptcy in an Oslo court is a “great disappointment,” not least for would-be saviour Christen Sveaas, but he and others stressed that operations at the company’s seven paper mills would continue as usual.
The paper mills are running well, have been generating profits and remain the debt-laden company’s greatest asset. Plans to sell them started moving forward last week after Norske Skog’s largest secured creditor, the Oceanwood Capital Management, withdrew support for any new recapitalization plan.
Newspaper Dagens Næringsliv (DN) reported just before the weekend that Oceanwood had instructed Citibank to begin the process for an auction of the plants. Around 100 potential bidders have already been identified.
It’s widely expected, though, that the plants will ultimately be bought up by Oceanwood and its new teammate Aker, the investment firm controlled by Norwegian industrialist Kjell Inge Røkke. They launched their own bid by teaming up last month, with a goal of acquiring the papermills cheaply and unburdened by debt, to eventually make up for their losses on loans to Norske Skog .
The decision by Norske Skog’s parent company to file for bankruptcy was all but forced by Oceanwood and Aker, but Sveaas and his allies had continued to search for an alternative. Sveaas has been Norske Skog’s largest shareholder, he was widely viewed as being able to save Norske Skog from bankruptcy and he’s been adverse to admitting defeat.
In the end, there was no choice. The board’s decision to file for bankruptcy was said to be unanimous, and made after all members agreed there no longer was any “realistic opportunity” to recapitalize the company that took on way too much debt during an international expansion period that began in the 1990s. Oceanwood had informed the board it was not willing to support any voluntary recapitalization.
Now Oceanwood’s unlisted subsidiary, Norske Skog AS, will effectively become the new operating parent company of the Norske Skog group, according to the company’s statement on Tuesday.
Sveaas himself stated that the bankruptcy process was not expected to have “any particular consequences for operations at Norske Skog’s seven paper mills.” No employees will lose their jobs, “operations will continue as normal, and all customers will continue to receive quality products from Norske Skog as before,” Sveaas said
(To read the full statement from Norske Skogindustrier, click here (external link).