The board of Directors of Norske Skogindustrier ASA has decided to file for bankruptcy at Oslo skifterett (Oslo bankruptcy court) today, Tuesday 19 December 2017. The board’s decision is unanimous and is due to the fact that there is no longer a realistic opportunity to achieve a voluntary recapitalization solution for the Norske Skog group. The group’s largest secured creditor, Oceanwood Capital Management Ltd (Oceanwood), has informed the board that it is not willing to support any such solution. The group’s operational activities will continue in Norske Skog AS as normal with as little impact as possible from the bankruptcy proceedings of the listed Norske Skogindustrier ASA. The non-listed Norske Skog AS will be the new operating parent company of the Norske Skog group, and will continue the head office function that has been performed by Norske Skogindustrier ASA.
The board and management of Norske Skogindustrier ASA have over an extended period worked hard to achieve a consensual recapitalization of the Norske Skog group and thereby avoid bankruptcy proceedings for the parent company. This work was well advanced and had broad support from the capital structure in October and November 2017. The board’s decision to file for bankruptcy is therefore made with great disappointment that this goal was not achieved, said Christen Sveaas, Chairman of the board of Norske Skogindustrier ASA
The recapitalization process has been extremely challenging due to the Group’s very complex capital structure. Therefore, a contingency plan has been prepared during the autumn for the event that the consensual recapitalization failed. Consequently, the group’s seven paper mills and all key stakeholders as well as employees, customers, suppliers and local authorities are prepared for the process that now must be implemented.
It is expected that the bankruptcy process of the listed parent company will not have any particular consequences for operations at Norske Skog’s seven paper mills. The operations will continue as normal, and all customers will continue to receive quality products from Norske Skog as before, Sveaas said.
The current board of directors was elected on 24 August 2017, and has from that day worked hard and intensively to analyze the group’s situation and prepare realistic solutions with management and the company’s financial and legal advisors. The new board announced on 12 September 2017 the board’s plan to launch an industry-based recapitalization transaction. This proposal was based on the board’s view of the level of debt and future interest payments that Norske Skog’s business could sustain. The recapitalized new Norske Skog consequently had significantly less debt than in the proposals announced earlier in 2017 from both the company and the company’s creditors. The Board’s industrial recapitalization proposal was however never made public as a result of the committee for the secured creditors prior to the announcement made it clear that they would not support the board’s proposal.
Then, the board proceeded with an adjusted recapitalization proposal following extensive dialogue with the committee for the secured creditors, the committee for the unsecured creditors and the company’s shareholders. The board launched a proposal for a consensual recapitalization solution on 18 September 2017. In this proposal, the debt level was increased somewhat in line with the view of the secured creditors’ committee, and the exchange ratio for equity of the parent company was adjusted somewhat in line with the views of both the unsecured and secured creditors’ committees. While this proposal did not achieve sufficient support from all creditor groups, there was still broad support for a recapitalization transaction in which all unsecured bond debt would be converted into equity and parts of the secured debt would also be converted into equity in order to achieve a sound capitalization of the new Norske Skog group.
After further dialogue among stakeholders, the board on 11 October 2017 announced its third and last recapitalization proposal. This proposal obtained support from both the group’s unsecured creditors and among the creditors in the group’s secured bond loan. However, the recapitalization proposal did not receive the necessary support from the creditors in the group’s EUR 100 million NSF facility (NSF facility), which is issued by Norske Skog AS.
The subsequent negotiations with the creditors of the NSF facility over a solution in which support for the board’s recapitalization proposal could be achieved ended unsuccessfully. However, the process resulted in Oceanwood resolving to buy out the creditors of the NSF facility, so that Oceanwood currently controls 100% of the NSF facility. Oceanwood also purchased additional significant holdings in the secured bond loan, where they are currently expected to own a stake well above 50%.
Oceanwood then chose to enter into an industrial partnership with Aker Capital AS, and announced on 23 November 2017, through a joint press release, that they had decided not to support further work on implementing a consensual recapitalization solution, despite the fact that the board’s third recapitalization proposal at this time seemed to have support both among the group’s secured creditors, the unsecured creditors and the parent company’s shareholders. Following the announcement of 23 November 2017, the board of directors of the parent company has attempted to bring Oceanwood and Aker Capital AS to change their positions in relation to a consensual recapitalization, but this has been unsuccessful. Oceanwood has later, in writing, confirmed to the board its position, namely that it is not willing to support a voluntary recapitalization.
The board has in the dialog with Oceanwood and Aker Capital AS suggested that Oceanwood and Aker Capital AS invite existing shareholders in Norske Skogindustrier ASA as co-investors on the same terms as Oceanwood and Aker Capital AS’ joint venture, if it were to become the new owner of Norske Skog AS. Such a continuation of today’s shareholders would in the view of the board ensure a strategic value for the new parent company in having shareholders where a considerable number also are fibre suppliers to the group, and many which are employed by the group. It still remains uncertain if such a co-investment opportunity will be offered to existing shareholders.
In the dialogue with Oceanwood and Aker Capital AS, the Board has expressed the opinion that it believes that a voluntary recapitalization solution would be a adequate way to realize Aker Capital AS’s industrially motivated intention to become a new controlling owner of Norske Skog. By a voluntary recapitalization transaction, Oceanwood would through the debt conversion end up as owner of a substantial part of the equity of a recapitalized Norske Skog that could have been offered to Aker Capital AS. The auction process that will now be implemented for Norske Skog AS will be open to all stakeholders, and it is currently unclear who will be the owner of Norske Skog’s operational business when the auction process is completed.
In the period following the announcement of 23 November 2017 from Oceanwood and Aker Capital AS, the board has explored whether other realistic solutions could be found in order to avoid bankruptcy of Norske Skogindustrier ASA. For instance, it has been assessed whether it would be possible to convert all unsecured debt to equity while the secured part of the group’s debt could be handled by selling the group’s operating business through the secured bond loan’s ongoing enforcement process. However, this has also proved to be impossible, partly due to lack of liquidity, remaining pension commitments, and Oceanwood’s lack of willingness to convert the parent company’s debt to operating subsidiaries and the perpetual bonds to equity.
The board and management have also worked on a contingency plan for the event that the recapitalization process should end with enforcement from the secured creditors, and a subsequent bankruptcy for the listed Norske Skogindustrier ASA. It is therefore a well-prepared process that is now being implemented, in which Norske Skog’s operating business is to be valued in accordance with the requirements agreed between the creditors in the inter-creditor agreement to which the group is a party. The board and management have fully cooperated with both the trustees for the secured bond loan, their financial and legal advisors and the board of Norske Skog AS over the recent period in order to facilitate a smooth process in line with the obligations and provisions that apply to the current situation.
The management and all employees at the headquarter have received binding offers of employment from Norske Skog AS, and the head office function will continue through Norske Skog AS. The operating business will continue with the least disturbances possible, and suppliers and customers of the mills should expect no changes to Norske Skog’s ongoing operations as a result of the bankruptcy proceedings of Norske Skogindustrier ASA.
The board wishes to thank all the employees of the Norske Skog group for demonstrating determination and a strong commitment throughout the demanding recapitalization process that has taken place during 2017. The board also wishes to thank the group’s customers and suppliers, who have continued to trade with the group’s companies in the challenging financial situation that has existed during 2017.
http://www.norskeskog.com/Default.aspx?ID=2890&t=2017-12-19T08:53:01+01:00