Attraktiv avkasting i eksportfinans-obligasjoner

Denne artikkelen er fra samarbeidspartneren vår.

I en artikkel publisert på Bloomberg fokuseres det på hvordan utviklingen i eksportfinans-obligasjoner har vært etter at selskapet ble nedgradert av Moodys i oktober .
Vår porteføljeforvalter Roar Tveit er intervjuet i artikkelen.

Tveit mener at sannsynligheten for at Eksportfinans misligholder sine obligasjonslån er mindre enn det ratingbyråene indikerer. Han mener blant annet at de sterke eierne som står bak Eksportfinans er med på å gjøre dette til en meget interessant investeringsmulighet.
Eksportfinans er den største investeringen i Holberg Kreditt. 

 
(BN) Eksportfinans Bonds Trounce HighYield Benchmarks: Nordic Credit

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Eksportfinans Bonds Trounce HighYield Benchmarks: Nordic Credit

20120328 07:40:14.898 GMT

By Josiane Kremer

March 28 (Bloomberg) ‐‐ Four months after Norway’s surprise decision to dismantle Eksportfinans ASA resulted in the loss of its investmentgrade credit ratings, the lender is making a comeback in the bond market.The yield on Eksportfinans’ $1.5 billion of 3 percent notes due 2014 fell to 5 percent today from 10.3 percent in December.

The bond has returned 17.6 percent, including reinvested interest, from a low on Dec. 1, compared with a gain of 8.42 percent in Bank of America Merrill Lynch’s Global High Yield BB Rated index.

 “The probability of default is smaller than the rating agencies are putting it at,” Roar Tveit, a highyield money manager based in Bergen, Norway, for the Holberg Kreditt fund at Holberg Fondsforvaltning AS, said in an interview. “We have strong owners behind this, so I don’t think we will have a default here. Even if the rating has come down, we really believe in this case.”

Norway’s government is the safest sovereign in the world, credit derivatives indicate. It costs 24.92 basis points, or $24,920, a year to insure $10 million in Norwegian debt for five years against default, creditdefault swaps show. Contracts tied to U.S. Treasuries cost 30.09 basis points, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.

The yield on Eksportfinans’s 4.75 percent benchmark 1 billion euro bond eased to 4.84 percent today, its lowest in a month, from 4.95 percent yesterday, according to Bloomberg generic prices.

Credit ShockThe world’s seventhlargest oil exporter boasts no net debt thanks to a $600 billion sovereignwealth fund and has the biggest budget surplus of any AAA rated nation, according to data compiled by Bloomberg. Norway’s mainland economy, which excludes income from oil, gas and shipping, will expand 3.25 percent this year, the central bank said March 14.

Norway’s Nov. 18 decision to wind down Eksportfinans, which has about $39 billion in debt outstanding, shocked credit markets as far away as Japan as investors dumped its debt.

Moody’s Investors Service cut the lender to speculativegrade on Nov.22, while Standard & Poor’s followed suit on Feb.15. Trade Minister Trond Giske said ratings firms underestimated the government’s support, while Eksportfinans has pledged to honor all its debts.

 “This is a classic ‘catching a fallen angel’ strategy in high yield,”  Arne Eidshagen, a money manager overseeing about $4.9 billion at Oslobased Alfred Berg Kapitalforvaltning, said in an interview. “It’s a very dramatic credit event. The Norwegian highyield market more than doubled overnight.”

‘Strong, Solid’

Bond traders refer to borrowers that lose their investmentgrade ratings as “fallen angels.” Grades below Baa3 at Moody’s and less than BBBat S&P are considered junk, or highyield, highrisk. 

Eksportfinans is 15 percent owned by the Norwegian government. DNB ASA, the country’s biggest bank, holds 40 percent, while 23 percent is held by Nordea Bank AB, the largest Nordic lender. Danske Bank A/S in Copenhagen owns 8.09 percent.Giske said in a Dec. 6 interview that Eksportfinans is a “strong, solid,” company that enjoys government backing and called the downgrades “unjustified.” His ministry said last month that Eksportfinans has enough cash to meet all its obligations as they fall due. The Finance Ministry said in February the lender enjoys “good liquidity and solvency.”

The assurances of support fall short of the formal guarantees that would warrant an investment grade, S&P said.

 

Wound Down

“They have stressed that they are an owner of the company but not more than that,” Per Tornqvist, an analyst at S&P in Stockholm, said in a February interview. “Our view is that the government no longer is supportive relative to Eksportfinans.”

The government of Prime Minister Jens Stoltenberg said in November Eksportfinans will be wound down after it failed to meet capital requirements that limit loans to single industries.

Since then, the country’s financial regulator has eased the standards to ensure the lender stays compliant.

The Financial Supervisory Authority granted Eksportfinans permission on Feb. 16 to extend its Dec. 31 deadline for limiting large exposures on individual loans to as late as the end of 2016.

Moody’s lowered Eksportfinans’ issuer rating to Ba1 on Nov.22, from Aa3. The lender had enjoyed a AAA grade until December 2008. S&P cut its rating on the company to BB+ from BBB+ on Feb. 15. It had ranked Eksportfinans AA until November last year.

Japan Skepticism

The downgrades sent tremors through credit markets, prompting DNB to cancel a Samurai bond sale. Kommunalbanken AS, a municipal Norwegian lender, saw yields on its $1 billion of 2.875 percent bonds due 2014 rise about half a percentage point to 1.63 percent in December. The yield has since declined to about 1.04 percent.

DNB returned to Japan’s debt markets in January, selling 65 billion yen in Samurai bonds. Kommunalbanken, known locally as KBN, last month increased a benchmark U.S. debt sale by 25 percent to meet demand.

In Japan, where investors hold more than 1 trillion yen ($12 billion) of Eksportfinans debt, including Samurai and Uridashi notes, according to SMBC Nikko Securities Inc., some skepticism remains toward Norway’s credit markets.

“The situation for Eksportfinans in Japan is pretty much a waitandsee stance for many institutional investors,” Akane Enatsu, a senior credit analyst at Barclays Capital in Tokyo, said in an emailed reply to questions.

Investors in Norway have benefited from the international selloff of the bonds, according to Fabian Qvist, head of fixedincome sales at Arctic Securities in Oslo.

 

‘Pragmatic Approach’

“It was predominantly sellers out of Asia and subsequently out of the U.S. who weren’t allowed to hold the paper” after it was graded junk, Qvist said in an interview. “The Norwegians took a more pragmatic approach. Christmas came early to the Norwegian highyield market.”

Investors demand 435 basis points, or 4.35 percentage points, more than benchmark government debt to hold Eksportfinans bonds due June 2013, and about 475 basis points for those maturing in November 2014. That compares with a spread of 255 basis points for bonds of large financial companies due in one to three years, with an average rating of A1, according to Bank of America Merrill Lynch index data.

‘Great Investment’

Bonds in euros with an average rating of BB, comparable with that of Eksportfinans, have a spread of 600 basis points and an average maturity of

 4.4 years, according to Merrill Lynch’s Euro High Yield, BB Rated index. No creditdefault swaps, which pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements, are tied to the company.

Yields on Eksportfinans’s 1 billion euros of 4.75 percent notes maturing in 2013 have fallen to less than 5 percent from more than 10 percent after the November downgrade by Moody’s. The yield was 4.84 percent yesterday, Bloomberg data show.

 “Investors who were allowed to invest, in spite of the subinvestment grade rating, saw the strong fundamentals of Eksportfinans, combined with the continued perceived strong backing from the Norwegian government,” said Stian Abrahamsen, an analyst at Pareto Securities AS. “Those who bought Eksportfinans bonds immediately after the downgrade by Moody’s have made a great investment to date.”

With assistance from John Glover in London. Editors: Tasneem Brogger, Jonas Bergman.

 To contact the reporter on this story:

Josiane Kremer in Oslo at +4722996043 or jkremer4@bloomberg.net

To contact the editor responsible for this story: Jonas Bergman at +4722996056 or jbergman@bloomberg.net

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