SEB to Sell 200 Million REC Shares After Orkla Ends Swap Accord

SEB AB is selling a 9.5 percent stake in Renewable Energy Corp ASA after Orkla ASA ended a so-called total return swap accord with the Swedish bank.

SEB plans to sell 200 million shares in a private placement at a price to be set through an accelerated book-building process, the Stockholm-based lender said in a statement.

“Orkla, primary insider in REC and counterparty to the total return swap agreement, has on 19 March 2013 sent a notice of early termination of the total return swap agreement conditional upon the successful completion of the private placement,” SEB said. The sale “relates to an unwinding of SEB’s hedge position in relation to the total return swap.”

The swap agreement was entered into on Sept. 26, when Orkla sold the shares at a price of 1.90 kroner apiece. The shares have since dropped to 1.45 kroner, even after rallying 35 percent this year.

The receiver in a total return swap gets payments generated by the asset as well as any price appreciation, while paying the other party an agreed set amount. If the asset falls in price, the receiver has to cover the difference.

REC, a Norwegian maker of solar energy components, has been under pressure from Chinese competitors that expanded capacity just as demand slowed, causing solar-wafer and cell prices to plummet. Cuts in renewable-energy subsidies in France, Italy and Germany have also reduced sales for manufacturers.

Orkla spokesman Haakon Mageli declined to comment on the transaction when Bloomberg News called him on his mobile phone. An unidentified person reached at SEB in Oslo also declined to immediately comment.