Recapitalization Proposal 18 September 2017

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Homer Morrison
6 years ago
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1 Recapitalization Proposal 8 September 207

Norske Skog Overview Leading European and Sole Australasian Publication Paper Producer Overview Norske Skog is a leading publication paper company with operations in Europe and Australasia with

2 Norske Skog Overview Leading European and Sole Australasian Publication Paper Producer Overview Norske Skog is a leading publication paper company with operations in Europe and Australasia with capacity of: Newsprint.8m tons Magazine 0.9m tons Production footprint: 4 mills in Europe 2.0m tons 3 mills in Australasia 0.7m tons c. 2,450 employees (as of 3 Dec 206) Skogn (Norway) Saugbrugs (Norway) Bruck (Austria) Golbey (France) Norske Skog is in a precarious financial situation Group gross debt is close to NOK 9 billion EBITDA guidance for 207 has been lowered to NOK 700 million The Group is unable to fulfill its financial obligations The Group has not made its interest payments on the SSN, NSF and SUNs 2026 and is in default Furthermore, the Group has utilized the grace period on interest payments on the PENs Secured bondholders have accelerated their claim under the SSNs, demanding their bonds repaid immediately in full The group is unable to repay the SSNs As a result, the parent company Norske Skogindustrier ASA is on the brink of bankruptcy Albury (Australia) Tasman (New Zealand) Boyer (Australia) 2

3 Pre Transaction and Pro Forma Net Leverage and Cash Interest Group s Net Leverage and Cash Interest to Be Significantly Reduced Group s current leverage (Net debt / EBITDA) is unsustainable above 0x Proposed recapitalization will reduce the leverage to around 3.5x Lower debt will reduce annual cash interest payments from approximately NOK 600m to NOK 200m Net Leverage Pre Transaction and Pro Forma Annual Cash Interest Pre Transaction and Pro Forma Net Debt / EBITDA 4.0 x NOKm x x x x x x x Pre Transaction Pro Forma 0 Pre Transaction Pro Forma Note: At FX as of 30 Jun 207: EUR/NOK of 9.573, USD/NOK of and AUD/NOK of Applies assumed EBITDA of 75 million. 3

4 Impact of Recapitalization Equitization Creates Value Pre Transaction (Q2 207) Pro Forma,000m 900m 800m 700m 600m 500m 400m 300m 200m 00m 0m Market Cap 25 Perpetual Notes 2026/2033 Notes 202/2023 Notes SSN NSF Par Value 5m 876m Other Net Debt PENs SSN NSF Pro forma for 40m equity issuance 6.0x EV / EBITDA 23m Equity 5.5x EV / EBITDA 75m Equity 5.0x EV / EBITDA 38m Equity PF Equity New SSN Par Value Other 250m Maturity Profile NOKm 3,500 3,000 2,500 2,000,500, Pre Transaction > 2033 > > 25 Debt NOKm 3,500 3,000 2,500 2,000,500, Pro Forma > 2033 > > 25 Debt Note: Other net debt is m based on cash of 52m pre transaction, 28m in AR facilities, 6m in other secured debt and 30m in leases (excludes Bruck off balance sheet receivables financing). Pro forma, other net debt is (3)m reflecting net cash inflow of 24m as a result of the 40m new money equity offering issue net of repayment of 6m Interim Liquidity Facility. Market Cap as of 5 Sep 207. Pro forma for 40m new money equity offering with proceeds net of repayment of 6m Interim Liquidity Facility retained as cash on balance sheet. Equity valuation applies 75m. 4

5 Proposal Summary Illustratively Assuming 75m EBITDA and a 6.0x EV / EBITDA Valuation Illustratively shown on a pre new money equity offering basis PF Equity Instrument Claim ( m) Debt Reinstatement ( m) Ownership % Equity Value 2 ( m) # of Shares (m) Total Consideration ( m) Secured Creditors NSF % 43 3,23 05 SSNs due % 34 9, Total SSCG % 77 3,3 427 Unsecured Creditors PENs due % PENs due % 62 SUNs due % SUNs due % 96 Perpetual Notes % 92 Total Unsecured Creditors % Existing Shareholders % Total % 89 3, Equity Value (NOKm),805 Equity Value per Share (NOK) 0.3 Note: analysis applies EUR/NOK and USD/NOK exchange rates respectively (as of 30 Jun 207 ). Claim includes accrued cash and PIK interest up to 30 Jun Total equity value is 89m assuming EV of 450m based on 6x EV / EBITDA multiple and 75m EBITDA, and net debt of 26m based on 250m New SSNs, 63m Other Debt and Leases and a cash position of 52m. Excludes 6m Interim Liquidity Facility. 5

6 Reinvestment Opportunity 40m New Money Equity Offering Overview New Shares & Dilution on Full Takeup The proposed recapitalization includes a 40m New Money Equity Offering available to unsecured noteholders and existing shareholders Unsecured noteholders and existing shareholders offered to subscribe up to 20m each Any unsubscribed portion by either unsecured noteholders or existing shareholders will be offered to the other group Subscription at a valuation of 6.0x EV / EBITDA multiple using applicable EBITDA of 75m Resulting subscription price of NOK 0.3 Up to c. 3bn new shares issued with dilution of c. 7% Unsecured creditors and existing shareholders have the opportunity to buy back in to the pro forma equity of up to 2% and 0% respectively Equity Value ( m) 2 89 Equity Value (NOKm),805 Pre New Money Equity Offering NoSO (m) 3,950 Subscription Price 0.3 Offering Amount ( m) 40 Offering Amount (NOKm) 383 Number of New Shares (m) 2,958 Pro-Forma NoSO (m) 6,908 Dilution % 7.5 % Class # of Shares (m) Pro Forma Economics 3 Pre New Money Equity Offering Ownership % Adj. # of New Shares (m) Post New Money Equity Offering # of Shares (m) Ownership % Secured Creditors 3, % - 3, % Unsecured Creditors %,479 2, % Existing Shareholders %,479, % Total 3, % 2,958 6, % Note: analysis applies EUR/NOK and USD/NOK exchange rates respectively (as of 30 Jun 207 ). Assumes subscription to full 40m New Money Equity Offering. 2 Equity value is 89m using EV of 450m based on 6x EV / EBITDA multiple and 75m EBITDA, and net debt of 26m based on 250m New SSNs, 63m Other Debt and Leases and a cash position of 52m. Excludes 6m Interim Liquidity Facility. 3 Assumes subscription of 20m each to Unsecured Creditors and Existing Shareholders. 6

7 Failure of the Proposal will Lead to a Share Pledge Enforcement Norske Skog Existing Structure Share Pledge Enforcement Existing Shareholders NSF & SSN Holders 00% Norske Skogindustrier ASA (Parent) 00% Norske TreindustrierAS (Trei) Junior Perpetual Notes (Perps) Senior Unsecured Notes (SUNs) 00% Norske Skog AS 00% Norske Holding AS (Holding) Prior Exchange Notes (PENs) Norske Skog Europe Norske Skog Australasia 00% Norske Skog AS Senior Secured Notes (SSNs) Loan Notes (NSF) Norske Skog Europe Norske Skog Australasia Junior debt is structurally subordinated to secured debt and has no asset collateral PENs (202/23) are issued by Norske Holding AS while SUNs (2026/33) and Perpetual Notes (25) are issued by Norske Skogindustrier ASA SSN (209) is issued by Norske Skog AS and have pledge in Norske Skog AS and the shares of the operating units (factories) NSF (2020) is issued by Norske Skog AS and has pledge in inventories and accounts receivables at Skogn and Saugbrugs and inventory at Golbey If the final attempt for a consensual solution is rejected, Norske Skogindustrier ASA will likely file for immediate bankruptcy Unsecured bondholders and shareholders are left with nothing Secured bondholders will take ownership of Norske Skog AS and the mills will continue operations as normal The alternative to the Company s proposal will likely lead to bankruptcy at the Parent but Norske Skog AS and the mills will continue operations as normal 7

8 Key Dates September 207 October 207 S M T W T F S S M T W T F S Date 8 Sep Description Commencement of Consent Solicitations 29 Sep Expiration deadline ~23 Oct Extraordinary General Meeting Followed by c. 6 8 weeks of implementation via a Scheme of Arrangement 8

New Norske Skog December 2017

New Norske Skog December 2017 New December 2017 Operations continue as normal New ( AS) is a leading European and sole Australasian publication paper producer New overview The group has the following production capacities Newsprint