16 July 2015 by lberuti
With all the noise made around Greece, one would be forgiven to have forgotten that the earning season has begun a week ago. If most of the results announced so far did not have a direct impact on risk premia, earnings release for the names with the most stretched credit metrics can have brutal consequences. Such was the case for NSINO ( Norske Skogindustrier ) today. They reported a poor quarter as cost reductions were not enough to offset lower volumes and capacity utilisation, as well as a weaker sales mix and some adverse FX impact, which eventually led to a quarterly EBITDA meaningfully lower than the market consensus. Even though the company kept buying some of their 2016 bonds in the market which could indicate their commitment to repaying these, big question marks exist regarding the capacity of NSINO to service their debt in the long run. In an otherwise bullish session, NSINO’s 5 year CDS was marked substantially wider at 56.5pts upfront. To protect $1 of NSINO's debt against a default of the company over the next 5 years, you need to pay 56.5cts right away and then 5cts per year.