* Storebrand says has financial flexibility to handle refinancing of its $738 million loan related to SPP
* Aims to be active in consolidation of Nordic financial sector; eyes Baltics, Russia and Ukraine in 3-7 years’ time.
* Norwegian financial sector has seen higher funding costs and less available liquidity in first quarter
By Camilla Knudsen and Aasa Christine Stoltz
OSLO, April 14 (Reuters) - Norwegian insurer Storebrand (STB.OL) has the financial flexibility to handle the refinancing of its $738 million loan related to the purchase of life insurer SPP, its chief executive said in an interview with Reuters.
Storebrand financed the $2.8 billion takeover of Swedish life insurer SPP last year partly with bridge loans of 4.6 billion crowns ($918 million), later reduced to 3.7 billion.
“We see that we have access to refinancing, and it is important for us to refinance (the loan) on terms favourable for the company,” Chief Executive Idar Kreutzer said.
When asked about access to such favourable conditions, he said: “We believe we have the necessary financial flexibility, and we are not worried about that.” Storebrand bought SPP from Sweden’s Handelsbanken (SHBa.ST) in a move to boost its business in the neighbouring country.
The loan matures on Sept. 2 this year. Analysts have expressed worries that a possible refinancing of the loan would come at a high cost, or that a share issue or sale of assets might be forced through. Refinancing of a 900 million crown, longer-term part of the loan came at a price of NIBOR (Norwegian interbank offered rate) plus 525 basis points — a price that Pareto Securities said was significantly more expensive than expected by the market.
Storebrand’s shares have lost 28 percent of their value so far in 2008, weighed down by the global financial crisis. On Monday, the shares were slightly up to a high of 41.30 crowns, valuing the company at about $3.8 billion.
The shares have also been hit by speculation that Icelandic bank Kaupthing KAUP.IC and investment firm Exista EXISTA.IC, may be forced to sell their stakes in Storebrand, amounting to a joint 28 percent, due to funding problems.
Kreutzer was reluctant to comment on the Icelandic interests in Storebrand, but said: “We have noticed that they have communicated a long-term perspective.” He noted that the head of the board at Kaupthing had joined Storebrand’s board, which in his view demonstrated its long-term interest.
As for the outlook for the Nordic market, Kreutzer said there were “clear and strong driving forces for additional consolidation”. Analysts have said Storebrand may also be a takeover target.
“It is natural that we will play an active role in the strategic development...both when it comes to the Nordics... including the Baltics and the North-European region,” he said.
Although Storebrand’s primary market is the Nordic region, Kreutzer said it will look to expand into emerging markets such as the Baltics, Russia and Ukraine, in about 3-7 years’ time.
“We do not have any concrete plans right now, but we have created strategic room for such possibilities,” Kreutzer said.
He said higher funding costs and less available liquidity had impacted the Norwegian financial sector of late as a result of the international turmoil.
“These are obvious consequences which we have seen in the first quarter, and that we have to assume will affect the markets for a while moving forward,” Kreutzer said. He declined to discuss Storebrand’s first quarter.
But Kreutzer said he expected the conditions in the market to improve somewhat down the line.
“We have seen that the spreads have shrunk but nobody dares...to forecast that this is over,” Kreutzer said, adding that Storebrand expects the spreads to continue to decrease, although not back to “extremely” low pre-crisis levels.
(editing by Elizabeth Fullerton)
((email@example.com; +47 22 93 69 02; Reuters messaging: rm://firstname.lastname@example.org))
($1=5.013 Norwegian Crown) Keywords: STOREBRAND/
C Reuters 2008. All rights reserved. Republication or redistribution ofReuters content, including by caching, framing or similar means, is expresslyprohibited without the prior written consent of Reuters. Reuters and the Reuterssphere logo are registered trademarks and trademarks of the Reuters group ofcompanies around the world.nL1466315