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UPDATE 2-End of road looms for Norske Skog as Aker seeks to buy paper mills
November 23, 2017 / 10:39 AM / 21 days ago

UPDATE 2-End of road looms for Norske Skog as Aker seeks to buy paper mills

* Aker and Oceanwood team up to restructure paper maker

* Norske Skog parent company says it is preparing for insolvency

* Norske Skog shares down 60 pct as creditor deal seen unlikely

* Aker in partnership to buy Norske’s paper mills

* Aker in no hurry to sell more oil-related assets (Adds Norske Skog parent company comment)

By Nerijus Adomaitis and Terje Solsvik

OSLO, Nov 23 (Reuters) - Debt-laden paper maker Norske Skogindustrier expects to declare insolvency, it said on Thursday, after Norwegian investment firm Aker and Norske’s leading creditor said they would push the company to give up its seven mills.

The board of Norske Skog has for months been trying to avoid bankruptcy and has pushed back multiple times deadlines to conclude negotiations with creditors.

Aker, the investment vehicle of Norwegian billionaire Kjell Inge Roekke, said it had formed a joint venture with London and Malta-based investment fund Oceanwood Capital Management, to bid for Norske Skog’s mills - its core assets.

“The best way to ensure the stability of the operating companies is through an enforcement of our share pledge collateral and invoking a sale of the shares in Norske Skog AS,” Oceanwood said in a statement.

“Together with Aker we intend to take part in a structured auction process that will result in a new ownership for the operating entities.”

The announcement could soon lead to a winding up of the listed parent company, Norske Skogindustrier ASA.

“Following the announcement by Oceanwood and Aker, a consensual recapitalization of the Norske Skog group is unlikely to be achievable. Consequently, Norske Skogindustrier ASA is likely to initiate insolvency proceedings,” the paper maker said in a statement.

Norske Skog’s net interest bearing debt stood at 7.04 billion Norwegian crowns ($866 million) at the end of the third quarter. The company, which has a market value of just 73 million crowns, is no longer paying interest on its bonds.

AKER DIVERSIFIES

The plan to buy paper mills is a departure for Aker, a group that is mostly focused on the oil and gas sector. It is the largest shareholder in oil firm Aker BP, oil services firms Aker Solutions and Akastor as well as platform builder Kvaerner.

“It would be a new industrial portfolio, and diversification of our portfolio,” Aker Chief Executive Oeyvind Eriksen told reporters and analysts at a presentation of its third-quarter earnings.

While the global demand for newsprint, Norske Skog’s key product, continues to decline as readers migrate to online news sources, the company’s primary problem is the size of its debt after multiple acquisitions, Aker said.

“Even in a declining market there will be demand for Norske Skog’s products and the winner in that market is the most efficient producer. So that’s what it’s all about,” Eriksen said.

Under the agreement, Aker and Oceanwood plan to be 50/50 owners.

Norske Skog shares were trading down 60 percent at 0.26 crowns at 1304 GMT.

Earlier, Aker said it was not in a hurry to sell more assets in the oil services industry as it presented rising third-quarter earnings year-on-year.

Aker’s Akastor unit recently agreed to sell 50 percent of its shares in AKOFS Offshore to Japan’s Mitsui in return for an initial cash payment of $142 million.

“It’s public knowledge that Aker has been exploring strategic options for our oil service businesses beyond the said divestments already announced by Akastor,” Chief Executive Oeyvind Eriksen wrote in Aker’s third-quarter earnings report.

“Rather than rushing a transaction, we will spend the time and effort required to conclude that process in the best interest of all stakeholders,” he added. ($1 = 8.1320 Norwegian crowns) (Writing by Gwladys Fouche; Editing by Elaine Hardcastle)

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