Bloomberg News

S&P Cuts Eksportfinans, Investigates EMTN Default Trigger

November 27, 2011

(Updates with comment from S&P in fifth paragraph, prospectus seventh paragraph.)

Nov. 25 (Bloomberg) -- Standard & Poor’s Ratings Services slashed Eksportfinans ASA to the third-lowest investment grade and is considering further cuts as it investigates whether a winding down and withdrawal of government support constitutes a default under the terms of its euro medium-term note program.

The Norwegian export lender’s long-term counterparty credit rating was lowered five steps to BBB+ from AA and placed on creditwatch negative, S&P said in a statement.

The CreditWatch will be resolved after a review of “the consequences of the government action to end the most important part of Eksportfinans’ business on the creditors’ position,” S&P said. “We will investigate whether this action may have triggered an event of default as defined by the terms and conditions of Eksportfinans’ EMTN program, and will then assess whether we consider this a default under our rating criteria.”

The government decided last week not to grant Eksportfinans permission to sidestep European capital requirements limiting concentrations of large loans and hamstringing the lender. Moody’s Investors Service earlier this week slashed the company’s debt rating to junk, sending its bonds reeling.

“This is signaling to the market place that we have identified something that might be another issue and we need to look closely at this,” Per Toernqvist, an analyst with S&P in Stockholm, said over the phone.

Bond Falls

The company’s 1 billion-euro 4.75 note due in June 2013 slumped 0.12 cents to 95.128 cents on the euro. The yield rose 10 basis points to 8.23 percent as of 2:28 p.m. in Oslo. The yield is up from 1.66 percent on Nov. 21.

The EMTN program has a condition that an event of default may be triggered should the company cease to carry out “substantially the whole of its business,” according to a prospectus for the program dated 2010.

Eksportfinans has 214 billion kroner ($37 billion) in outstanding debt, Bjoern Erik Naess, the chief financial officer at DNB ASA, the company’s largest shareholder, said on a conference call on Nov. 23. The company also said then that it had “a good liquidity situation and it has every intention to honor all of its obligations.”

“Following the Norwegian government’s decision to end Eksportfinans’ role as a provider of export credits, we have reassessed our view of the likelihood of it receiving extraordinary government support in the event of financial distress to ‘moderate’ from ‘very high,’” S&P said.

DNB owns 40 percent of the lender, while 15 percent is owned by the Norwegian government. Nordea Bank AB, the largest Nordic lender, holds 23.21 percent, and Danske Bank A/S, based in Copenhagen, owns 8.09 percent.

--Editors: Jonas Bergman, Tasneem Brogger

To contact the reporter on this story: Stephen Treloar at Meera Bhatia at

To contact the editor responsible for this story: Angela Cullen at

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