14 September 2017 by lberuti
Credit Default Swaps (CDS) referencing NSINO ( Norske Skogindustrier ) were triggered in July after the company missed a €17mln interest payment on one of the bonds it had issued. It was the second credit event on the name in 18 months. The first followed a debt restructuring which did not address any of the issues facing NSINO and was merely designed to accommodate a group of bondholders who, at the time, also owned protection against a default of the company. It left the papermaker struggling with $1Bln of debt and slumping newspaper readership. A few days ago, the long running saga took another twist when senior secured bondholders demanded immediate repayment of their notes after NSINO unveiled another debt restructuring proposal. These senior secured bondholders have a claim over most of NSINO’s asset, including its seven paper mills. Even though they are yet to take possession of any assets, that latest twist, which paves the way for a complicated and unpredictable process, spooked investors ahead of the auction which was held today to determine the payout of the CDS. They almost zeroed the expected value going forward of any existing debt other than the senior secured notes, setting the recovery at 2.25%. An investor who had insured 10M€ of debt will get 9.775M€. It was a brutal end to a long agony on that CDS.