Richest Scandinavian Nation Extends Its Junk BoomStephen Treloar
Norway’s record corporate debt binge last year is set to continue as the junk bond market in Scandinavia’s richest nation becomes a magnet for companies seeking ready cash.
Corporate bond issuance reached a record 104 billion kroner ($17 billion) in 2013, including 61.4 billion kroner in high-yield issuance, according to Nordea Bank AB. Demand will probably continue to propel issuance this year as risk appetite opens up for even more speculative deals, Lars Kirkeby, chief credit analyst at Nordea in Oslo, said in an interview.
“The party will go on,” he said. “All the fundamentals are there for it to be a very active high-yield year.”
Companies based outside Norway, such as Teekay Offshore Partners LP, have kicked off the year tapping investors in the Norwegian bond market. The debt is attracting buyers in search of higher yields amid signs the global economy is on the mend and as returns in investment-grade assets remain subdued.
The DNB High Yield Total Return Index rose 12.7 percent over the past 12 months. That compares with a 0.7 percent gain for Norwegian government bonds, according to Bloomberg Sovereign Indexes.
Banks are also attracting more investment-grade corporates back to loans as they open their loan books again, following a period of building capital to meet stricter capital requirements. High-yield companies can now capitalize on low interest rates, rising stock markets, higher risk appetite and tightening credit spreads, according to Kirkeby.
“Investors are taking on more and more risk,” he said. We’ll definitely see much more issuance in the lower end of the rating scale this year.’’
High-yield debt rose to 59 percent of total issuance last year from 54 percent a year earlier. Norway’s history as a home for capital-intensive oil services and shipping companies has made it a destination for international issuers seeking funding.
Hamilton, Bermuda-based Teekay Offshore, the largest owner and operator of shuttle tankers, last week sold a 1 billion-krone senior unsecured bond maturing in 2019. “The bond offering was significantly oversubscribed,” it said in a statement.
“The general impression is that risk appetite among investors is there, which points to a busy year for this segment,” Bernt Christian Brun, chief strategist at Danske Bank A/S in Oslo, said in a Jan. 14 note. “We expect 2014 to surpass 2013 for both high yield and investment grade.”
DNB ASA, the largest Norwegian lender, says more issuance from foreign companies will be needed to sustain the growth and meet demand.
Non-Norwegian issuers accounted for more than half the high-yield corporate debt sold last year, making up about 55 percent of new issuance, according to data compiled by DNB. That compares with 50 percent the year before.
“In order for the Norwegian high-yield market to keep growing we need foreign issuers to keep coming,” said Ole Einar Stokstad, head of credit research at DNB in Oslo. The market has developed a reputation for being very efficient where issuers can raise funds quite quickly, he said.
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