BlueCrest Denies It Would Profit From Norske Skog Default

BlueCrest Capital Management denied that it stands to profit from a default by Norske Skogindustrier ASA as the fund manager seeks a court order preventing the Norwegian paper maker from exchanging bonds.

“The economic interests of BlueCrest are completely aligned with Norske’s long-term financial health,” Deniz Akgul, a London-based credit trader at BlueCrest, wrote in a letter to the New York court hearing the case. Its funds “are net long,” meaning they hold more bonds than credit-default swaps, he wrote.

Norske Skog’s debt-swap plan has divided investors, with opposition from secured bondholders including BlueCrest and support from unsecured creditors including Blackstone Group LP’s GSO Capital Partners. The company has said that opponents are trying to drive it into bankruptcy to profit from bets against its survival, and its Chief Executive Officer Sven Ombudstvedt told the court his “understanding” was that BlueCrest holds as much as 130 million euros ($141 million) of default insurance.

“Mr. Ombudstvedt’s ‘understanding’ is unsupported and incorrect,” Akgul wrote in the letter. The figure also contradicts previous statements from the paper maker, Akgul wrote, citing e-mails between the Norske Skog’s lawyer and BlueCrest’s advisers from last year.

There will be a hearing on March 2 on the bid to block the exchange.

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