LONDON, Sept 28 (IFR) - The long-awaited restructuring of Norske Skog, which seemed to be reaching consensus earlier this week, looks like being disrupted again after junior creditors objected to the rescue plan put out by the Norwegian pulp and paper company, and since backed by two-thirds of secured creditors.
The committee of unsecured noteholders, which would have been left with a small amount of equity in the group under the company plan, called for the latter to be withdrawn and urged the board to work with them on its alternative proposal.
In addition the unsecured committee, claiming to have a majority of the notes and thus able to block the company deal, called for the senior secured creditors to drop their demands that their €290m defaulted notes be repaid immediately.
This repayment looks impossible since the group is relying on an emergency €16m short-term loan from those creditors. That failure to repay could see these creditors enforce their claims and take control of the group’s seven operating paper mills.
The committee said the idea this could be achieved without the consent of more junior notes, such as the priority exchange noteholders it represents, was “a false and dangerous assumption that could lead to significant value destruction for all stakeholders, suppliers, customers and employees”.
Norske Skog said its board would “review the unsecured proposal in an appropriate manner”. It did not change the deadline for acceptance of its own plan, which is 5pm Oslo time on Friday.
The unsecured committee said the company’s proposal would mean the senior secured noteholders would “recover substantially above par”.
Its alternative would see “25% more new equity” invested in the group “to further deleverage the business and better position it for growth”. That could potentially reduce the senior secured noteholders’ equity stake to 51.8%.
It said if it proved impossible to have “good faith negotiations” between the three major parties “the unsecured committee may have little choice but to litigate to protect its rights and those of similarly situated stakeholders”.
Moelis is advising the unsecured committee.
As well as each creditor class providing over 75% backing by value, shareholders have to give at least two-thirds support to the company proposal for it go through. (Reporting by Christopher Spink)