Bonds Daily. ABGSC Daily Report - Bonds. Credit Research - 18 February :11 CET

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1 Credit Research - 18 February :11 CET Bonds Daily ABGSC Daily Report - Bonds Tulip Oil announces start of production at Q10 on 15 February Key milestone successfully met On Friday afternoon, Tulip Oil announced initial production from the first well (QA-01) on the Q10 gas field offshore the Netherlands. Tulip states that the project has been executed with a perfect safety record, on budget and ahead of schedule (which was first gas in May 19). 12 months from FID to first gas makes its one of the fastest such developments on record. Gas is flowing through the unmanned platform installed in December, to the P15 platform owned by TAQA for further processing before being sold to market. The well which has been set in production is the first discovery well, and up to four more wells are planned to be set into operation during this year, with production slowly ramping up. We estimate peak production in Assuming the current spot gas price (TTF) of EUR ~18/MWh the expected production profile and dependent on the actual current cash position, we estimate Tulip to be in a net cash position late 19. Tulip has not yet provided details about how well the reservoir performs, and this will be key to understand the near term cash flow profile. We note that Tulip states in the announcement that Q10 will be the cornerstone production and cash generator for the Company s future growth. Should the production develop as we expect, we do not rule out a refinancing of the EUR 87m 8.5% coupon 22 bond (make-whole until April from April 20-Oct 20.). While we await more details of the reservoir and facility performance, we consider this announcement to be very positive for the credit. Oscar Properties: profit warning and negative earnings Oscar Properties released its Q4 report already on Friday evening and announced that the gross profit from the project development came in at a negative SEK 233m (20m in Q4 17), corresponding to a gross margin of -93.4% in the quarter. The profitability is neg. impacted by price cuts (announced 10% cut in Sept-18 in 4 projects) as well as increased production costs and low activity in its projects. Meanwhile, the central admin expenses continues to increase, and grew 36% y-oy to SEK 24m, resulting in an EBIT (adj. for value changes) of SEK - 251m (11m). The number of sold apartments increased y-o-y to 28 units (16), where 20 of the units are related to projects subject to price cuts and other offers. OP currently have 8 projects under production, where 4 actually are completed and where 2 more are set to be completed in Q1 19, leaving a total of 184 apartments in production phase already in Q2 this year (vs. current 963) with a current sales ratio of ~57%. This, in our view, implies that earnings will be limited ahead. For an improvement, it would require new projects to start, while we think that, in the current market, it will be hard to achieve sufficient sales ratios to reach production starts. The next large project, which OP focuses on to production start, is the Gasklockan project, consisting of 317 units and there are currently 36 apartments booked in the project (75 has been sell-started). Stock market Today 1D 1M 3M YTD OSE % 3% 0% 8% OMX 1, % 9% 7% 13% SBX 1, % 8% 8% 13% OSX % 5% -12% 20% VIX % -22% -26% -36% High Yield Indices (Spread) Itraxx Xover 5Y 300-8bp -26bp -27bp -61bp HYG US bp -32bp -25bp -121bp BUHYEN 403-6bp -35bp -17bp -128bp ABG HY index 500-9bp n.a. n.a. n.a. Interest Rates Basis points NIBOR 3M bp 0.0bp 8.0bp 3.0bp NIBOR 3Y SWAP bp -2.2bp -10.0bp 3.8bp NIBOR 5Y SWAP bp -5.0bp -19.5bp 4.0bp STIBOR 3M bp 1.4bp 39.3bp 5.8bp STIBOR 3Y SWAP bp 0.0bp -1.8bp 2.9bp STIBOR 5Y SWAP bp -3.2bp -14.0bp -0.2bp US L3M bp -9.7bp 3.7bp -11.1bp US LIBOR 3Y SWAP bp -5.0bp -39.8bp 3.3bp US LIBOR 5Y SWAP bp -5.2bp -43.6bp 4.5bp Currencies USD/NOK % 1% 2% -1% EUR/NOK % 0% 0% -1% SEK/NOK % -2% -1% -4% Commodities Oil - Brent (USD/bl) % 8% -1% 21% Shipping Rates Baltic Dry Bulk 639 2% -50% -38% -50% Baltic Tank (Dirty) 818 1% -35% -20% -19% Baltic Tank (Clean) 609-1% -25% -40% -9% Source: Bloomberg Source: ABG Sundal Collier ABGSC Credit Research ABGSC HY Index Alexander Jost alexander.jost@abgsc.no Haakon Amundsen haakon.amundsen@abgsc.no Rikard M. Braaten rikard.braaten@abgsc.no Andreas Johannessen andreas.johannessen@abgsc.no Eric Wahlström eric.w ahlstrom@abgsc.se Please refer to important disclosures at the end of this report

2 We argue that it will be hard to reach the sufficient sales ratio (usually ~70% to get funding) to reach the estimated production start (Q3 19), as 1) it is a very large project, which has to be built in one go (can not separate it into phases) and 2) the estimated completion is set to 2022 and we have seen an aversion from consumers to purchase anything with an estimated move-in in 2-3 years. The uncertainties regarding the funding position remain, with the ~SEK 1.1bn IB debt maturing in 2019 compared to SEK 1.25bn in short-term assets (earned non-invoiced revenue + other current assets) and cash, while the operation is running on a quarterly cash flow deficit of ~SEK 40-50m from central admin + financial costs (incl. pref dividend). OP is also set to purchase the land (Q2-Q3 19) related to the Gasklockan project (from Stockholm municipality), which could amount to SEK m in total. Gaming: newsflow on regulations in Norway There has been some newsflow during the week of Norwegian Gaming Authorities (NGA) enforcing stricter requirements on six Mala based gaming companies incl. Gaming Innovation Group. According to an article in DN, the companies were sent a warning letter in November regarding the companies illegal operations in Norway. Worth mentioning is that there is already a payment ban in place where Norwegian banks are not allowed to transfer money to international operators. However, thus far this have had limited impact on international operators (even though they all have been complaining about how hard it has become to facilitate payments) as they use payments through a third party to get around this. It is the latter third-party solution that the NGA now will stop. Overall, new and stricter regulations will have a negative effect on gaming companies and in particular operators, but how this restriction technically will be implemented is not clear to us at this point. Gaming Innovation Group reports its geographic split on income were it bundles Nordics into one segment. In the 2017 annual report the Nordics accounted for 50% of total revenues. Our guesstimate is that Norway accounts for somewhere around 15%-20% of total revenues. American Tanker: Written Resolution AMSC has requested a written resolution supported by a majority of the bondholders in AMSCNO 9 ¼ 02/22/22 whereby the company requests to: Redemption: Remove amortization for the bonds, instead having the bond redeemed in full at maturity (previously 4x semi-annual instalments of USD 10m commencing after 42months) Call options increased: First call changed to 106% after 36 months, stepping down to 104% after 48 months thereafter 102% (excluding maturity date). The bond was previously non-call 2y, %/103.7%/101.85%/100% after 24/36/48/54 months. Denomination: Nominal amount changed from USD 200,000 to USD 1,000 Bondholders will receive a one-time amendment fee of 0.25% (flat) payable to the bondholders 10 business days after the proposed resolution has been accepted (record date at end-of-business, the date of the approval of the Proposed Resolution). The proposal follows after AMSC/OSG renegotiated its bareboat contracts in December 19, which we argued de-risked the bonds and improved revenue visibility. See updated terms below: Opus Group: Q4 solid report On Friday, the company reported Q4 18 sales of SEK 657m (+2% vs ABGSC SEK 644m), while came in at EBITDA SEK 132m (+4.7% vs ABGSC SEK 126mm). EBITDA margin was 19.7% (+1% vs ABGSC 19.5%). Conclusion: Solid report in line with expectations and no real surprises. The IVS segment performed better than expected with net sales of SEK 103m (+23.5% vs ABGSC SEK 83.4m), mainly driven by increasing recurring revenues and higher equipment sales. Total y-o-y growth amounted to 32.4% driven by acquisition of Gordon-Darby, organic growth 8.0%. Don t expect any major estimate revisions. 18 February 2019 ABG Sundal Collier 2

3 Kistefos: Acquiring NextGenTel On Friday morning, NextGenTel announced it had received a voluntary cash offer on all of its shares by Kistefos AS (formally through the wholly owned subsidiary Telecom Holding 3 AS) valuing the equity in NextGenTel at NOK 326m. Incl. pre commitments Kistefos now controls 44% of the company. The board of directors of NextGenTel unanimously recommends the offer. As Kistefos pre-bid already owned 25% of the shares, the acquisition (if completed) represents an additional NOK 250m in cash outflow. From the viewpoint of Kistefos creditors we see it as positive that it undertakes investments in new companies in a period where it has substantial underlying dividend capacity available that could be distributed during H2 19. NAS: CEO sells subscription rights of NOK ~500m Main owner and CEO has entered into an agreements to sell subscription rights with a 30% discount to the theoretical value of the subscription right. The buyers have committed to a total investment of NOK ~500 million. We have previously known that the CEO would only buy new shares for NOK 340m (keeping his ownership would mean NOK 740m). However, selling subscription rights with a 30% discount highlights, in our view, that he is feeling liquidity pressure The Dry Bulk market: Iron ore imports into China are down 9% y-o-y in January, but have slightly increased from December levels. Iron ore port stocks have progressively increased by 2% into the New Year to 144 Mt, but are still ~6% below 2018 levels at the same time last year. Vale restarted its operations at Tubarao, from which it exports ~100 Mtpa, after signing an agreement with the local government. Corem: signs a lease with Dahl in Järfälla The green contract encompass 4,500 sqm and is signed for 10 years. Dahl also has large upcoming contracts with Stendörren. Swedish house prices According to Valueguard, Swedish house prices was down 0.1% y-o-y but was up 1.7% m-o-m in January. Apartment prices decreased by 0.3% y-o-y but increased 0.4% m-o-m. According to Valueguard, house prices in Stockholm decreased by 0.7% y-o-y but was up with 1.5% m-o-m. Apartment prices decreased 0.6% y-o-y and 0.4% m-o-m. The Swedish housing market is stabilizing and we do not expect any major sustainable price correction as long as unemployment and interest rates stay low. According to Mäklarstatistik published earlier this month, ~10,600 houses and apartments were sold in January, which is 6% lower than in January 2018, but higher compared to both January 2017 and According to Booli data, the number of transactions for apartments in the whole country is down 11% y-o-y in January. 18 February 2019 ABG Sundal Collier 3

4 US rig count up 2 to 1,051 since last week Baker Hughes US rig count out on Friday afternoon, total rig count up 2 to 1,051 Oil rigs up 3 to 857 Oil rig count is up 7% Y-o-Y The horizontal rig count down 8 to 915 Gas rigs down 1 to 194 Rigs categorized as miscellaneous flat at 0 Onshore rig count flat at 1,030 Offshore rig count up 2 to 21 The Q1 19 average rig count is down 1.4% since Q4 18 Reported corporate HY bonds traded in Oslo at Friday 15 February 2019 Price Time to Issuer Ticker Volume 15/02/2019 Credit spread maturity Yield change Aker ASA 18/23 FRN C AKER m % 0.1% Aker Solutions ASA 18/22 FRN AKSO03 2.0m % 0.4% Bonheur ASA 14/21 FRN BON06 6.0m % 0.5% Bonheur ASA 17/22 FRN C BON m % 1.7% Golar LNG Partners LP 17/21 FRN USD GOLP03 0.4m % 0.0% Source: ABG Sundal Collier, company data 18 February 2019 ABG Sundal Collier 4

5 ssss Analyst certification I/We, Alexander Jost, Andreas Johannessen, Eric Wahlström, Haakon Amundsen, Rikard Magnus Braaten, the author(s) of this report, certify that not withstanding the existence of any such potential conflicts of interests referred to below, the views expressed in this report accurately reflect my/our personal view about the companies and securities covered in this report. I/We further certify that I/We have not been, nor am/are or will be, receiving direct or indirect compensation related to the specific recommendations or views contained in this report. Analyst valuation methods When evaluating the credit risk of the issuer, we look at credit ratios, management and corporate strategy, business risk, industry risk and management risk appetite. Further, we look at dividend and financial policies. From this analysis and after an assessment of the asset values as well as any potential structural subordination, ABG Sundal Collier also estimates the company s default probability and the bond s recovery rate. Important Company Specific Disclosure mo For company specific disclosures including employee, partner and ABGSC holdings, Corporate Finance services market making, conflicts of interest of each company mentioned in this report for which ABG Sundal Collier provides coverage (unless it is initiating coverage), please refer to the research section of our website located at All prices are as of market close on 30 November, 2018 unless otherwise noted. Disclaimer This document has been prepared by ABG Sundal Collier which is the marketing name referring to all or any of ABG Sundal Collier ASA, ABG Sundal Collier AB or ABG Sundal Collier Partners LLP and any of their affiliated or associated companies and their directors, officers, representatives and employees. 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6 ABGSC Research Department Joint Global Head of Research John Olaisen Christer Linde Strategy Christer Linde, Quant/Technical Derek Laliberte Capital Goods Anders Idborg Olof Cederholm Karl Bokvist Chemicals Construction & Real Estate Tobias Kaj Philip Hallberg Laurits Louis Kjaergaard Consumer Goods Michael Vitfell-Rasmussen Ludvig Kapanen Credit Research Alexander Jost Rikard Magnus Braaten Andreas Johannessen Haakon Amundsen Eric Wahlström Financials Magnus Andersson Mads Thinggaard Patrik Brattelius Jan Erik Gjerland Jonas Bru Lien Food & Beverages Michael Vitfell-Rasmussen Healthcare Sten Gustafsson Christopher W. Uhde Daniel Thorsson Andrew Carlsen Ole Henrik Bang-Andreasen lnvestment Companies Derek Laliberte IT Aksel Øverland Engebakken Daniel Thorsson Andrew Carlsen Simon Granath Metals & Mining Oil & Gas John Olaisen Karl Fredrik Schjøtt-Pedersen Oil Service John Olaisen Haakon Amundsen Lukas Daul Karl Fredrik Schjøtt-Pedersen Online Gaming Aksel Øverland Engebakken Erik Moberg Stefan Knutsson Pulp & Paper Øystein Elton Lodgaard Renewable Energy Casper Blom Retail Ludvig Kapanen Seafood Martin Kaland Services Michael Vitfell-Rasmussen Victor Forssell Shipping & Transport Dennis Anghelopoulos Casper Blom Lukas Daul Telecom Operators Peter Kurt Nielsen Utilities Small Caps Andrew Carlsen Daniel Thorsson Johan Nilsson Wall Laurits Louis Kjaergaard Media Aksel Øverland Engebakken Derek Laliberte Norway Sweden Denmark United Kingdom USA Germany Singapore Pb Vika Box 7269 Forbindelsesvej 12, 10 Paternoster Row, 5th fl 850 Third Avenue, Suite 9-C Schillerstrasse 2, 5. OG 10 Collyer Quay NO-0115 OSLO Norway SE STOCKHOLM Sweden DK-2100 COPENHAGEN Denmark LONDON EC4M 7EJ UK NEW YORK, NY USA DE FRANKFURT Germany Ocean Financial Center #40-07, Singapore Tel: Tel: Tel: Tel: Tel Tel Tel Fax: Fax: Fax: Fax: Fax Fax February 2019 ABG Sundal Collier 6