17 September 2015 by lberuti
NSINO (Norske Skogindustrier ASA) is in a tricky situation. Well, their bondholders are anyway. The company has NOK896mln cash on hands, it is burning NOK100mln every quarter, and they have to deal with NOK295mln bonds maturing October 15th, 2015 and NOK983mln bonds maturing June 15th, 2016. It also has bonds due in 2017 and 2019. Unless something is done very soon, it is obvious that it will face some problems. To complicate matters further the 2019 bonds are secured, while the 2015, 2016 & 2017 are not. The owners of the 2019 bonds will probably claim that the value breaks in 19s, and that redeeming at par the 15s, let alone the 16s or the 17s, is not an option. They should come (sooner rather than later) with a proposal that will aim at fixing the business and putting the company on a viable financial trajectory. Their proposal would most likely wipe the unsecured bonds out. The holders of the unsecured bonds will try and keep some optionality and probably suggest an exchange on their bonds into cash plus longer dated securities. It seems that the 2019 holders are about to fire first as we heard today that a number of them have had financial advisory pitches presented to them, and that NSINO had appointed Houlihan Lokey to help them examine options. Unsurprisingly, investors reacted by bidding up short dated protection, sending 1 year CDS at 39pts upfront plus 500bps running.