Norwegian high-yield bond market reopening raises revival hopes

Stolt-Nielsen

14/06/2016 13:03

* Two issuers reopen dormant Norwegian high-yield market 
    * Investor interest after oil price recovery, restructurings 
    * Analysts expect non-oil related firms to lead borrowing 
 
    By Henrik Stolen 
    OSLO, June 14 (Reuters) - A reawakening of Norwegian 
high-yield corporate bonds has raised hopes of an eventual 
resurgence for the multi-billion dollar market, which has dried 
up as the oil industry grapples with lower prices. 
    Although defaults by supply ship and drilling rig operators 
in the oil-rich country are set to hit some investors, there are 
signs others are again willing to buy bonds offering higher 
returns for more risk.  urn:newsml:reuters.com:*:nL5N1774V1 
    This interest is due to a rise in oil prices, with Brent 
crude  LCOc1  at just under $50 from a January low of $27, and 
the fact that Norwegian companies are restructuring debt.  
    Two companies have so far tested the waters, with chemical 
tanker firm Stolt-Nielsen  SNI.OL  last week adding to existing 
bonds, while shipping firm Color Group refinanced 500 million 
Norwegian crowns ($59.89 million) after spotting investor 
interest in the market. 
    "It obviously helps (higher oil prices) and that you see 
restructuring processes...both are positive for investors," 
Color's chief financial officer, Bjoern Paulsen, told Reuters, 
adding that most of the demand was from existing bondholders. 
    "It's about 60 percent Norwegian investors and 40 percent 
foreign investors," he said. 
    Norwegian oil service firms led a dramatic growth in 
high-yield bond issuance in Norway. Outstanding issuance stood 
at 218 billion crowns ($26.6 billion) at the end of 2015, up 
from just 15 billion in 2003, data from DNB Markets and 
financial data service Stamdata showed. 
    And while oil service firms made up about 40 percent of the 
total, they are not expected to start issuing again soon, 
despite their need for cash, as they need to restructure first, 
credit analysts said. 
     They expect non-oil firms to raise money, with many 
brokerages sitting on potential deals in anticipation of being 
able to offer acceptable prices for issuers at the same time as 
sufficient returns for investors. 
    "That window is now open," Haseeb Syed, head of credit 
research at Danske Bank in Norway, said.  
    He expects new issues could be around 500 million crowns 
($61 million) each or larger, with enough demand for two to 
three billion crowns to be issued before the summer holidays. 
    "The volume capacity is somewhat reduced, but I won't be 
surprised if we see more volumes once we got started," said 
Magnus Vie Sundal, credit strategist at DNB Markets, adding that 
flows into credit funds had increased in recent months. 
    ($1 = 8.3480 Norwegian crowns) 
 
 (Editing by Alexander Smith) 
 ((henrik.stolen@thomsonreuters.com; +47 952 79 474; Reuters 
Messaging: henrik.stolen.thomsonreuters.com@reuters.net)) 
 
Keywords: NORWAY HIGHYIELD/