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.