Norske Skog Downgraded by S&P to Selective Default on Buybacks

Norske Skogindustrier ASA, Europe’s third-largest maker of newsprint, was downgraded by Standard & Poor’s to “selective default” as the company has repurchased its debt at a deep discount.

Norske Skog was downgraded from CCC+/C after it continued to repurchase bonds at an average discount of about 30 percent, the ratings company said today in a statement. It kept a CCC+ rating on Norske Skog’s 2033 bonds, which weren’t included in the buybacks, S&P said.

“By reacquiring its bonds at a large discount, Norske Skog in our view paid investors participating in the transactions less than originally promised,” Gustav Liedgren, an analyst at Standard & Poor’s, said in the statement. “We consider the cumulative effect of the transactions to be tantamount to a debt restructuring.”

Norske Skog is trimming debt as it seeks to cut a 6 billion kroner ($1.09 billion) net interest-bearing debt burden amid excess supply in the newsprint market and competition from online media.

The yield on the company’s 7 percent 2017 senior unsecured bond was little changed at 19.02 percent as of 1:23 p.m. in Oslo.

To contact the reporter on this story: Stephen Treloar in Oslo at streloar1@bloomberg.net

To contact the editor responsible for this story: Christian Wienberg at cwienberg@bloomberg.net

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.