Yields on Norske Skogindustrier ASA’s (NSG) 2017 bonds fell after Europe’s third-largest maker of newsprint said it sold assets in Brazil to help cut 6.5 billion-krone ($1.1 billion) of debt, easing pressure on repayments.
Yields on the papermaker’s 7 percent 2017 bonds dropped 1.8 percentage points to 23.1 percent, the lowest level since June 4, according to BNP Paribas SA prices compiled by Bloomberg.
“The transaction, which was not unexpected, adds a lot of comfort that 2014 maturities will be fully repaid,” Thomas Nielsen, an analyst at Pareto Securities AS, said in a note. The sale is also positive for Norske Skog’s shares, he said.
Norske Skog is trying to cut debt that rose to 6.5 billion kroner last quarter amid weak paper demand and low prices. It reported a bigger-than-estimated loss for the first quarter and a cash outflow as capacity closures failed to boost prices.
Norske Skog sold a 51 percent stake in the Pisa mill in Brazil for $41.3 million to Papeles Bio Bio SA, the Oslo-based company said in a statement today. Papeles Bio Bio, which is controlled by a group of Chilean investors, has agreed terms to buy the remaining stake in the Brazilian operations in one to two years, Norske Skog said.
While the boost to liquidity is positive, the sale of assets outside Europe won’t benefit Norske Skog’s debt situation in the longer-term, Riikka Tuominen, a credit analyst at Nordea Bank AB in Helsinki, said in an e-mailed note.
“Operations outside Europe are cash generative and clearly more profitable than the European operations on average,” she said. “The disposals of cash generative units naturally weaken the expected recovery for the bonds in the case of default, which we have already viewed as fairly low.”
Shares in Norske Skog gained as much as 8.6 percent and traded up 3 percent at 2.77 kroner as of 12:06 p.m. in Oslo. The stock has fallen 55 percent from a 12-month high of 6.2 kroner on Sept. 12.
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