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Norske Skog Targets Cheapest Bonds Over Maturity in Buy Backs

Norske Skogindustrier ASA, Europe’s third-largest maker of newsprint, is targeting the bonds trading the cheapest rather than those with the shortest maturities as it buys back debt to trim its balance sheet.

“We are looking at the yield” when doing repurchases, Chief Financial Officer Audun Roeneid said today in an interview in Oslo. Norske Skog is looking at the bonds maturing 2014 through 2017, he said.

The company, based in Lysaker, Norway, bought back $46.9 million of its euro and dollar denominated bonds in the second quarter, according to Bloomberg calculations. The company is trimming debt as it seeks to cut a 6.9 billion kroner ($1.14 billion) debt burden amid excess supply in the newsprint market and competition from online media.

The buybacks in the quarter are positive as they signal the company is “comfortable with liquidity situation,” Oeyvind Hamre and other analysts at Pareto Securities ASA, said in an e-mailed note to clients.

Yields on the company’s 7 percent notes maturing June 2017 fell 1.6 percentage point to 20.769 percent as of 4:14 p.m. in Oslo, down from as high as 32.462 percent on Oct. 28.

Second-quarter earnings before interest, tax, depreciation and amortization, or Ebitda, rose to 393 million kroner from 248 million kroner a year earlier, the company said in statement today. Cash flow from operating activities before financial items rose to 423 million kroner from 295 million kroner while its net interest-bearing debt fell to 6.9 billion kroner from 7.1 billion kroner.

The company sold its Parenco mill and the Reparco recovered paper business to H2 Equity Partners, it said in a separate statement. The transaction will increase the company’s cash by about 30 million euros ($36.8 million), the papermaker said, without providing further details.

The sale of Parenco “should help liquidity further without losing significant Ebitda,” Pareto said.

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