Norway Junk Bond Market Makes Comeback as More Issuance Looms

Updated on
  • New high-yield issues seen in ‘coming weeks’, Tveit Says
  • Oil service issuers unlikely to return to the market yet

Norway’s junk bond market is coming back to life.

The battered high-yield market of Western Europe’s largest oil producer is once again opening up and more issues are now in the works, according to Roar Tveit, portfolio manager at Holberg Fondsforvaltning AS.

“There will be more issues in the coming weeks. We’re involved in some in Norway,” he said in an interview in Oslo Tuesday.

The oil-intensive Norwegian junk bond market has recovered with Brent crude trading back around $50 and several companies restructuring their debt, boosting the DNB High Yield Total Return Hedged Index by 15 percent from a low in March.

Shipowner Ocean Yield issued 750 million kroner of unsecured bonds on Monday while Odfjell SE issued 500 million kroner earlier this month. Holberg Kreditt, which manages about 4 billion kroner ($500 million) of bonds, bought in both issues. It has returned 3.1 percent so far this year, beating the benchmark’s 0.4 percent return.

“We’re not in any dialog now, but the LNG sector could be possible,” he said. “There are some refinancing of bonds next year within LNG.”

Tveit, 37, sees value in the bonds of companies such as oil producer Det Norske Oljeselskap ASA and shipper Stolt Nielsen Ltd since the credit spreads in the Norwegian market are generally higher than in the rest of Europe. The fund has reduced its holdings in Petroleum Geo-Services ASA and converted bonds to equity in Prosafe SE.

“Oil service still looks weak with big challenges within rig and supply,” he said. “But pure oil producers, such as Det Norske, have had a fantastic development. That type of issuer has access to the bond market. It’s oil service that has taken the hit.”

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