Eksportfinans ASA (6120B) will fight government plans to dismantle the state-backed lender and is exploring ways of keeping its business running, Chief Financial Officer Geir Ove Olsen said.
“We are now looking at whether there are any business opportunities going forward,” Olsen said in an interview yesterday, after the Oslo-based company reported earnings. “The company is not in a wind down but in a controlled downsizing. We are going to have a strategy discussion with the board and see if there are any alternatives.”
The government’s Nov. 18 announcement that it will wind down Eksportfinans triggered junk ratings at Moody’s Investors Services and Standard & Poor’s and shook credit markets as far afield as Asia. Japan’s Securities Dealers Association said last month investors there are “anxious” at the prospect of losses and urged the Norwegian government to do more to restore Eksportfinans to investment grade.
The 50-year-old company, which was originally created to support Norwegian exporters, has $39 billion in bonds outstanding. In Japan, investors hold more than 1 trillion yen ($12.3 billion) of Eksportfinans debt in June, including Samurai and Uridashi notes, according to SMBC Nikko Securities Inc. The decision to dismantle the lender came after it was in breach of capital rules restricting single loan exposures.
The yield on the company’s 4.75 percent 1 billion-euro note maturing in 2013 slipped 44 basis points to 4.55 percent as of 12:06 p.m. in Oslo, the lowest level since Feb. 14. The surged to more than 10 percent in November.
Norway’s Financial Supervisory Authority last month granted the lender permission to extend the time limit on bringing its loan exposures into compliance with the statutory minimum for large exposures. Eksportfinans had been granted a deadline of Dec. 31 this year. Five loans would probably have remained in breach of the rules after this date and the FSA set new deadlines for each individual loan, running from the end of 2014 to end of 2016.
Japan’s SDA said last month it was still waiting for details from Norway as to when investors can expect their money back. Both the government and Eksportfinans say the payment schedule is clear.
“They want us to come back with a payment plan for our debt, but what we have said the whole time is that we will pay the debt when it matures,” Olsen said. There haven’t been any “significant changes” to the plans announced in November, he said.
In a plan issued on Nov. 27, Eksportfinans said it will have 41 billion kroner in bond debt by 2017. The company’s 120 billion-krone book of loans will shrink to 21 billion kroner by the end of 2017, it said.
Eksportfinans yesterday said profit for 2011 rose to 30 billion kroner ($5.4 billion), including a 29 billion-krone unrealized gain on its own debt. That compares with 448 million kroner in 2010. The company had a core capital adequacy ratio of 16.1 percent at the end of 2011. The board said it won’t pay a dividend in order to maintain a capital buffer needed to honor debt obligations.
“We believe that a good anticipated balance between assets and liabilities, comfortable liquidity reserves and a good balance sheet imply that the company is well positioned to preserve value and continue operations for years to come,” Chief Executive Officer Gisele Marchand said.
Eksportfinans had 217 billion kroner in unsecured notes and structured notes outstanding at the end of last year, according to yesterday’s report. The company said it had total liabilities of 232 billion kroner, versus assets of 237 billion kroner.
The company yesterday issued a detailed maturity profile of its debt, indicating that it expects to have 26 billion kroner in liabilities with maturities of one to three months. Eksportfinans also said it had 118 billion kroner in debt due over the next one to five years.
“It’s not certain all this will mature at the given times but it’s what we expect, and it’s still pretty uncertain on the derivatives,” Olsen said.
Eksportfinans is 15 percent owned by the Norwegian government. DNB ASA (DNB), the country’s biggest bank, holds 40 percent, while 23 percent is held by Nordea Bank AB (NDA), the largest Nordic lender. Danske Bank A/S (DANSKE) in Copenhagen owns 8.09 percent.
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