27 April 2016 by lberuti
It is difficult to get rid of bad habits, and it seems that NSINO’s ( Norske Skogindustrier ) management cannot help to kick the can down the road when it comes to addressing their debt pile problem. They have been on the verge of default for a while, but somehow they have so far managed to avoid it. Their most recent manoeuvre involved extending the maturity of some of their shorter dated bonds. The ISDA Determination Committee decided on Friday, 22nd April that it amounted to a restructuring credit event and investors who have bought protection on NSINO will have the opportunity (but they do not have to ) to trigger their CDS contracts until the auction is held. In any case, it means that on Monday NSINO has been spun off from all the credit indices to which it belonged. An investor X who had on Friday a €74m position on iTraxx Crossover Series 23 (ITXEX23) for instance has now a position of €73m ITXEX23 that does not include NSINO any longer and a separate €1m position on NSINO. Investor X still has to deal with his NSINO CDS position, but investor Y who buys or sells ITXEX23 today does not have to worry about the fate of NSINO. Since Monday morning, Series 23 and older are much cleaner portfolios – Series 24 and 25 never included NSINO – which explains their outperformance on a weekly basis.