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A glance at the “Norwegian” HY market is and why it’s such an efficient platform for raising flexible debt for foreign companies

Since early 2000, the Norwegian corporate bond market has been transformed from a small market dominated by domestic utility enterprises into a global market characterized by large issue volumes of high yield corporate bonds. This makes Oslo Stock Exchange and Nordic Alternative Bond Market the third largest market place for HY corporate bonds in the world.

Since early 2000, the Norwegian corporate bond market has been transformed from a small market dominated by domestic utility enterprisesinto a global market characterized by large issue volumes of high yield corporate bonds. This makes Oslo Stock Exchange and Nordic Alternative Bond Market the third largest market place for HY corporate bonds in the world. 

In the same period there have been an increasing number of international issuers and international investors on the Norwegian HY market. In 2009 only 3 per cent of the listed corporate bonds came from foreign issuers. Now the latest figures shows that in 2013 the number  has increased from 3 per cent to almost 50 per cent and the total NOK figure related to foreign issuers is as of 2013 approx NOK 99 billion (EURO ~ 11.5 billion).

2014 picked up where 2013 left off and looks set to be another record year for the Oslo Børs fixed income marketplaces. The volume of new issues so far this year is markedly higher than at the same time last year. The list of new foreign corporate issues so far this year includes Axis Offshore and energy companies such as Iona Energy, Salamander Energy and Igas Energy. The Dutch ship owner Bluewater Holding carried out the largest new issue so far this year of NOK 2.4 billion, while the Toronto-listed energy company Iona Energy carried out the second-largest placement at NOK 1.7 billion.

What kind of international issuers are seeking the Norwegian HY market?

Issuers representingcapital-intensive industry such as the Shipping, Offshore and Oil & Gas industry are still the biggest players, but other sectors, such as the Food and Service Industry, Fishery, Real Estate and other industries are more and more using the HY platform for raising debt.

Issuers of all risk classes are represented and many issuers are in the early life cycle phase with e.g assets under construction, low cash flow visibility, high leverage etc.

Why Norway – Key takeaways

  • Flexible and tailored structures available – secured/unsecured, project and corporate structures, optional redemption, amortization/no-amortization/cash sweep are all flexible elements in a bond structure.
  • No public rating requirements form agencies such as Standard & Poor’s, Moody or Fitch.  The Norwegian HY market relies on a credit analysis prepared by the arranger’ credit research department, which also includes a shadow rating.
  • Straight forward documentation – term sheet (normally 5 – 8 pages) followed by a standard agreement (30 – 35 pages) between the issuer and the trustee.
  • Highly developed trustee system. The Norwegian Trustee (Nw Norsk Tillitsmann) is the trustee of more than 95 % of the bond issued made under Norwegian law and the portfolio consists of more than 1,900 loan trusteeships (500 issuers) representing a nominal value of more than NOK 750 billion (EURO ~ 87.2 billion).
  • Short timeline – normally 4/5 weeks for first time issuers, considerably lower for frequent issuers.
  • Low transaction cost compared to UK or US.
  • Arrangers with strong placing power operating in a mature bond market.
  • Optional listing, but, if initiated, the listing process is speedy and efficient. Oslo Børs operates two marketplaces for listing and trading in fixed income instruments: Nordic ABM and Oslo Børs. The rules on duty of disclosure and trading are very largely the same for the two marketplaces, but Nordic ABM offers a speedier and less comprehensive listing process.
  •  Good liquidity in the secondary market.

 

Co-authored by Terje Gulbrandsen, tg@steenstrup.no, +47 480 16 588

The Author

Erik Lind
Erik Lind Erik Lind is partner at Steenstrup Stordrange’s office in Oslo, and is a member of the M&A and Corporate Practice. Lind has a 13 years’ exsperience in mergers and acquisitions (M&A), capital market transactions and restructuring. He advises private equity and venture capital funds, financial advisers and industrial clients in this respect. Lind has also significant expertise in real estate transactions, including structuring real estate syndicates and real estate funds.

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