Silver Point Claim Eksportfinans Bonds in Default Rejected

The Tokyo District Court rejected a claim by Silver Point Capital LP, a U.S. hedge fund, that Norway’s Eksportfinans ASA defaulted on its Samurai bonds.

Judge Hidetaka Matsui announced the verdict in Tokyo today, without giving a reason for the decision.

“On the basis that the plaintiffs’ allegations regarding events of default are groundless, the Tokyo District Court denied the plaintiffs’ claims and the plaintiffs shall bear the costs for its claim,” Eksportfinans said in a release on its website today. The fund has the option to lodge an appeal at the Tokyo High Court within two weeks of the verdict, it said.

Standard & Poor’s said on March 26 that while the lender could absorb the claim of about 9.6 billion yen ($94 million) a ruling against Eksportfinans “could significantly increase the likelihood of an acceleration of some of its other outstanding liabilities.” A potential appeal by Silver Point leaves open the risk of an accelerated repayment of liabilities as Eksportfinans’s balance sheet declines, it said in the statement.

The ratings company put its non-investment-grade BB+ score on CreditWatch with negative implications ahead of the verdict. It said it would expect to affirm the ratings if the lender won the case.

Eksportfinans, partly state-owned, was cut to junk at Moody’s Investors Service in November 2011 and S&P in February 2012 after the Norwegian government opted to set up a new export financing program to replace the lender.

Support Withdrawn

Eksportfinans is being wound down following the government’s withdrawal of support. The complaint in question was sent to the Tokyo District Court by Silver Point Capital Fund and Silver Point Capital Offshore Master Fund LP, Oslo-based Eksportfinans said in January last year.

S&P said this week it expects the verdict to be appealed, extending the legal process by an estimated six to eight months.

“It is also our understanding that any requests to accelerate payments on the grounds of a cessation of the business default clause would likely be suspended pending the outcome of the final judgment in the appeals process,” the ratings company said.

Mugi Sekido, a lawyer representing Eksportfinans, declined to comment on the verdict before seeing details of the ruling. Akihiro Tozawa, a lawyer for Silver Point, didn’t answer a phone call seeking comment.

Eksportfinans sold Samurai bonds, which are yen-denominated notes sold in Japan by overseas borrowers, in June 2010 and July 2011, according to data compiled by Bloomberg. The lender issued 30 billion yen of 0.89 percent debt due in June 2015 and the same amount of 0.72 percent bonds maturing in July 2016.

To contact the reporters on this story: Finbarr Flynn in Tokyo at fflynn3@bloomberg.net; Emi Urabe in Tokyo at eurabe@bloomberg.net

To contact the editors responsible for this story: Katrina Nicholas at knicholas2@bloomberg.net Ken McCallum, Chris Bourke

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