Norwegian Credit Market Overview 7 November 217 Haseeb Syed Bendik Engebretsen David Boyle Head of Credit Research Norway Credit Research Analyst Credit Research Analyst Phone +47 85 4 54 19 Phone +47 85 4 69 14 Phone + 47 85 4 54 17 Mobile +47 97 98 78 82 Mobile +47 92 88 12 1 Mobile + 47 47 95 82 77 haseeb.syed@danskebank.com bee@danskebank.com dboy@danskebank.com Denmark HolmensKanal 2-12 192 Copenhagen K Finland Pohjoisesplanadi 37A 1 Helsinki Norway Bryggetorget 4 17 Oslo Sweden Norrmalmstorg 1 13 92 Stockholm United Kingdom 75 King William Street London EC4N 7DT This document is intended for institutional investors and is not subject to all the independence and disclosure standards applicable to debt research reports prepared for retail investors Investment Research www.danskebank.com/ci Important disclosures and certifications are contained from page 17 of this report.
Moody s corporate credit spreads spreads back to tight levels Relative pricing Moody s B spreads over LIBOR by maturity (bp) 3 years 5 years 7 years 55 5 45 4 35 3 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Moody s five-year premiums by rating (bp)* Aaa Aa2 A2 Baa2 Ba2 B2 Caa-C Aaa 17 56 99 22 366 44 Aa2-17 4 82 23 35 423 A2-56 -4 42 163 31 383 Baa2-99 -82-42 121 268 341 Ba2-22 -23-163 -121 146 22 B2-366 -35-31 -268-146 73 Caa-C -44-423 -383-341 -22-73 * Premiums calculated as bp Low rating bp High rating. Source: Moody s Investor Service, Danske Bank DCM Research (all charts) Moody s BBB spreads over LIBOR by maturity (bp) 3 Year 5 Year 7 Year 21 19 17 15 13 134 11 9 12 7 5 63 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Moody s five-year spreads over LIBOR by rating (bp) 8 7 6 5 4 3 2 1 Baa2 Ba2 B2 37 224 12 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 2
Average spread (bps) Average spread (bps) bps over base rate bps over base rate Norwegian five-year B index up some 2bps in October; five-year BBB index remains stable European vs Norwegian high-yield spreads (bp) European vs Norwegian investment-grade spreads (bp) 1,5 5-Years NOK BB spread index 5-Years NOK B spread index itraxx Crossover 2 15 NOK 5-year A-index NOK 5-year BBB-index itraxx Main 1, 1 5 5 Relative pricing Feb-16 Jun-16 Oct-16 Feb-17 Jun-17 Oct-17 NOK BB spread curves: YTD spread tightening 6 5 4 3 85bps tightening 2 1 1 2 3 4 5 6 7 Years to maturity BB curve November 217 BB curve January 217 Feb-16 Jun-16 Oct-16 Feb-17 Jun-17 Oct-17 NOK IG spread curves: YTD spread tightening 14 12 1 8 6 4 2 1 2 3 4 5 6 7 Years to maturity BBB curve November 217 BBB curve January 217 Source: Bloomberg, Danske Bank DCM Research (all charts) 3
bps bps bps USD/bbl bps USD/bbl Norwegian five-year B index up some 2bps in October; five-year BBB index remains stable Relative pricing Norwegian investment grade vs oil price (Brent) NOK 5-year A-index 19 NOK 5-year BBB-index 7 17 Brent spot (r.h.a) 6 15 5 13 4 11 3 9 2 7 1 5 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 5Y senior financials vs Norwegian corporate IG (bp) NOK 5-year A-index 17 NOK Senior financials 15 13 11 9 7 5 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Norwegian high yield vs oil price (Brent) 13 11 9 7 5 5-Years NOK BB spread index 5-Years NOK B spread index Brent spot (r.h.a) 3 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Norwegian senior financials and municipalities (bp) 2 15 1 5 NOK Senior financials Oslo municipality OMF index Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-1 8 6 4 2 Source: Bloomberg, Danske Bank DCM Research (all charts) 4
(NOKbn) AuM (NOKbn) (NOKbn) AuM (NOKbn) Notable outflows in HY in September High yield outlows of c.nok44m in September: largest HY outflows YTD. IG inflows continue at decent levels Norwegian high-yield fund flows Norwegian investment-grade fund flows Relative pricing 1.5 1..5. -.5-1. 28 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 The 1 largest high-yield funds AuM (YTD change, NOKm AuM)* Handelsbanken Høyrente DNB High Yield Holberg Kreditt Pareto Høyrente Storebrand Rente+ First Høyrente SR-Rente Borea Høyrente Alfred Berg Høyrente CII (NOK) Eika Kreditt Sum HY flows HY AuM -22%, 2,274-3%, 2,141 47%, 1,744 9%, 1,327 181%, 1,323-3%, 1,132 51%, 1,2 36 35 34 33 32 31 3 29 13%, 4,361 8 Sum IG flows IG AuM 195 6 4 19 2 185-2 18-4 -6 175-8 -1 17-12 165 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 28%, 6,939 5%, 6,927 Source: Verdipapirforbundet, Danske Bank DCM Research (all charts) 5
Issued volumes YTD (NOKbn) Primary corporate IG activity over past four months Primary market 217: corporate IG bond volumes Corporate IG bond issuance by sector Relative pricing 12 1 8 6 4 2 Jul Aug Sep Oct 214 215 216 217 Selected corporate investment-grade bond settlements last month Real Estate Utilities Transportation Convenience Goods Jul-Sep issuances (NOKbn) Oct issuances (NOKbn) 2 4 6 8 1 Issued Outstanding Settlement Maturity Base rate / ISIN Issuer (NOKm) (NOKm) Currency Date Date Risk Coupon (%) Coupon type Issue Type NO187217 AKA AS 5 5 NOK Oct-17 Oct-22 Senior Secured 3.5 Fixed Bonds XS1698119382 Assa Abloy AB 2 2 NOK Oct-17 Oct-27 Senior Unsecured 2.68 Fixed Bonds NO186862 Eidsiva Energi AS 75 75 NOK Oct-17 Oct-23 Senior Unsecured.84 NIBOR 3 Month Bonds NO18825 Forskningsveien II AS 715 715 NOK Oct-17 Oct-26 Senior Secured 3.7 Fixed Bonds NO187381 Fredrikstad Energi AS 4 4 NOK Oct-17 Oct-22 Senior Unsecured 1.15 NIBOR 3 Month Bonds NO188181 Lyse AS 3 3 NOK Oct-17 Oct-29 Senior Unsecured 3.8 Fixed Bonds NO177589 Offentlig Bygg Bodø 1 AS 2 18 NOK Oct-17 Sep-26 Senior Secured 3.8 Fixed Bonds NO1752181 Oslo Kontoreiendom II Holding AS 52 272 NOK Oct-17 Dec-29 Senior Secured 4.15 Fixed Bonds 6 Note: Settlement date may differ from the date of the transaction Source: Stamdata, Danske Bank DCM Research (all charts and table)
Issued volumes YTD (NOKbn) Primary corporate HY activity over past four months Primary market 217: corporate high-yield bond volumes Corporate HY bond issuances by sector Relative pricing 1 8 6 4 2 Jul Aug Sep Oct 214 215 216 217 Selected corporate high-yield bond settlements last month Shipping Telecom/IT Real Estate Oil and gas E&P Seafood Health Care Industry Jul-Sep issuances (NOKbn) Oct issuances (NOKbn) 1 2 3 4 5 6 Issued Outstanding Settlement Maturity Base rate / ISIN Issuer (NOKm) (NOKm) Currency Date Date Risk Coupon (%) Coupon type Issue Type NO1754534 Bulk Industrier AS 1 5 NOK Oct-17 Dec-18 Senior Secured 7. NIBOR 3 Month Bonds NO185591 Danefjellveien 12 AS 278 278 NOK Oct-17 Oct-22 Senior Secured 4.33 Fixed Bonds NO18569 Danefjellveien 12 AS 22 22 NOK Oct-17 Oct-22 Senior Secured 6. Fixed Bonds NO185138 Grundingen Fastighets AB 8 8 USD Oct-17 Oct-21 Senior Secured 6. Fixed Bonds NO188256 HI Bidco AS 35 35 NOK Oct-17 Jan-23 Senior Secured 8. NIBOR 3 Month Bonds NO188249 HI Bidco AS 1, 1, NOK Oct-17 Oct-22 Senior Secured 5.5 NIBOR 3 Month Bonds NO188835 Hospitality Invest AS 85 85 NOK Oct-17 Oct-22 Senior Unsecured 6. NIBOR 3 Month Bonds NO18792 Ice Group Scandinavia 1,4 1,4 NOK Oct-17 Oct-21 Senior Secured 4.6 NIBOR 3 Month Bonds NO1776776 Holdings OSX3 Cayman AS Limited 17 65 USD Oct-17 Oct-18 Senior Unsecured 35. Fixed Bonds NO188231 Tulip Oil Netherlands Offshore 811 811 EUR Oct-17 Oct-22 Senior Secured 8.5 EURIBOR 3 Bonds NO187373 B.V. Wallenius Wilhelmsen Logistics ASA 1, 1, NOK Oct-17 Oct-22 Senior Unsecured 3. NIBOR 3 Month Bonds Note: Settlement date may differ from the date of the transaction. Source: Stamdata, Danske Bank DCM Research (all charts and table) 7
Traded volumes (NOKbn) Traded volumes (NOKbn) Little liquidity in HY bonds at discount over the summer. Longer IG bonds gaining traction Corporate high-yield secondary market traded volumes (NOKm) Price intervals for traded corp. HY volumes 6 5 4 3 Aug Sep Oct <5 5-6 6-7 7-8 8-9 9-1 >1 1% 8% 6% 2 4% 1 214 215 216 217 2% % Jan Feb Mar Apr May Jun Jul Aug Sep Oct Relative pricing Corporate IG secondary market traded volumes (NOKm) Maturity intervals for traded corp. IG volumes (years) 8 7 6 5 4 3 2 1 Aug Sep Oct 215 216 217 1 2-5 > 5 1% 8% 6% 4% 2% % Jan Feb Mar Apr May Jun Jul Aug Sep Oct Note: Figures include volumes from taps and repurchases Source: Oslo Børs, Danske Bank DCM Research (all charts) 8
Traded volumes and spreads for the most liquid bonds in October Relative pricing Volumes and spreads for most traded shipping bonds Average spread Traded volumes (NOKm) Traded volumes in 217 2 4 6 8 AMTI1 (99.3) TKLNG3 (99.1) TOP2 (11.6) EULU1 (1.3) TOP5 (99.3) TKLNG4 (13.5) SNI5 (99.5) ODF8 (11.6) SBULK1 (1.1) GOLP3 (99.5) Volumes and spreads for most traded in other* HY industries Figures may include tap issuances and repurchases. *Note: In brackets the last traded price; other industries include the sectors of consumer and convenience goods, transportation, industry, auto, telecom and more Source: Oslo Børs, Danske Bank DCM Research (all charts) 2 4 6 8 1, Average spread (bps) Average spread Traded volumes (NOKm) Traded volumes in 217 2 4 6 8 1 12 14 NHC1 (1.9) COLG1 PRO (15.4) HOIN1 (12.3) IGSH1 (99) GEP1 (88) CRAYON2 (13) NAS7 (99.8) DNO1 (98.1) DETNOR2 (117.4) VVH1 (1.5) 2 4 6 8 1, Average spread (bps) Volumes and spreads for most traded oil service bonds Average spread Traded volumes (NOKm) Traded volumes in 217 1 2 3 4 5 6 BON6 (99.5) BWO4 (96) SDRL8 (14.8) SONG4 (13.9) BLH2 PRO (1.8) BON3 (13.5) BWO3 (95) FOE5 (62.5) BON5 (11.6) SIOFF2 (73) 2 4 6 8 1, Average spread (bps) Volumes and spreads for most traded corp. IG names Average spread Traded volumes in Oct Kongsberg Gruppen ASA (1.9) Yara International ASA (15.4) Fjellinjen AS (12.3) Agder Energi AS (99) Thon Holding AS (88) Entra ASA (13) Akershus Energi AS (99.8) Statkraft AS (98.1) Schibsted ASA (117.4) Vasakronan AB (publ) (1.5) Traded volumes (NOKm) 5 1 15 5 1 15 Average spread (bps) 9
Mid price Relative value in the oil service industry Time to maturity over prices oil service industry 1 BON3 AWDR1 BON5 PGS 218 BLH2 PRO BWO1 SONG4 DEED1 RET BWO2 BWO3 SONG5 BON6 BWO4 8 SIOFF2 EMGS2 HAVI7 6 FOE5 SOFF4 Relative pricing (1) 4 HAVI4 2 NADL1 IOSH1 PRO SDRL8 BOAO2 PRO TTM (yrs) Average TTM Average Mid Price.5 1. 1.5 2. 2.5 3. 3.5 4. 4.5 5. Time to maturity (years) Based on mid-price (all charts). Source: Bloomberg, Oslo Børs, Danske Bank DCM Research 1
Mid price Relative value in the oil service industry profitability versus price LTM EBITDA margin over bond prices oil service industry 1 PGS 218 BWO1 BWO2 BWO3 BWO4 SONG4 SONG5 BLH2 PRO DEED1 RET AWDR1 BON3 BON6 BON5 8 6 FOE5 Relative pricing (2) 4 2 BOAO2 PRO NADL1 SDRL8 EBITDA margin Average EBITDA margin Average Mid Price 2% 3% 4% 5% 6% 7% 8% 9% 1% LTM EBITDA margin Based on mid-price. Source: Bloomberg, Oslo Børs, Danske Bank DCM Research 11
Relative value in the oil services industry leverage versus price LTM net debt/ebitda over bond prices oil service industry 1 8 BON3 AWDR1BON5 BON6 BLH2 PRO SONG4 SONG5 PGS 218 BWO2 BWO3 BWO1 BWO4 DEED1 RET Relative pricing (3) Mid price 6 4 FOE5 NIBD/EBITDA Average NIBD/EBITDA Average Mid Price 2 SDRL8 NADL1. 2. 4. 6. 8. 1. 12. 14. LTM NIBD/EBITDA Based on mid-price Source: Bloomberg, Oslo Børs, Danske Bank DCM Research 12
Mid spread over 3MN (bps) Relative value in the shipping industry Time to maturity over quoted spread shipping industry 7 TTM (yrs) 6 GOLP2 Average TTM Average Mid spread 5 TOP5 HLNG2 TKLNG3 ODF8 GLOG2 HLNG3 TKLNG4 Relative pricing (4) 4 3 2 TKLNG2 ODF6 SFLN3 OCY2 SNI4 ODF7 SNI6 OCY3 SNI5 OCY4 WWI19 PRO WWI23 1 WWI22 A.P. Møller.5 1. 1.5 2. 2.5 3. 3.5 4. 4.5 5. Time to maturity (years) Source: Bloomberg, Oslo Børs, Stamdata, Danske Bank DCM Research 13
Mid spread over 3MN (bps) Relative value in the shipping industry profitability versus spread LTM EBITDA margin over quoted spread shipping industry 7 6 EBITDA MARGIN Average EBITDA margin Average Mid spread GOLP2 5 ODF8 HLNG3 HLNG2 TOP5 GLOG2 TKLNG4 Relative pricing (5) 4 3 2 SNI5 ODF7 SNI6 WWI19 PRO SNI4 ODF6 SFLN3 TKLNG3 TKLNG2 OCY4 OCY3 OCY2 1 WWI23 A.P. Møller WWI22 A.P. Møller A.P. Møller % 1% 2% 3% 4% 5% 6% 7% 8% 9% 1% LTM EBITDA margin Source: Bloomberg, Oslo Børs, Stamdata, Danske Bank DCM Research 14
Mid spread over 3MN (bps) Relative value in the shipping industry leverage versus spread LTM net debt/ebitda over quoted spreads shipping industry 7 NIBD/EBITDA 6 GOLP2 Average NIBD/EBITDA Average Mid spread 5 HLNG3 HLNG2 TOP5 ODF8 GLOG2 TKLNG4 Relative pricing (6) 4 3 2 WWI19 PRO OCY4 SNI5 OCY3 SNI6 SNI4 OCY2 ODF7 SFLN3 ODF6 TKLNG3 TKLNG2 1 A.P. Møller A.P. Møller A.P. Møller WWI23 WWI22. 1. 2. 3. 4. 5. 6. 7. 8. 9. LTM NIBD/EBITDA Source: Bloomberg, Oslo Børs, Stamdata, Danske Bank DCM Research 15
Fixed Income Credit Research team Thomas Hovard Head of Credit Research +45 45 12 85 5 hova@danskebank.com Henrik René Andresen Credit Portfolios +45 45 13 33 27 hena@danskebank.com Gabriel Bergin Strategy, Financials +46 8 568 862 gabe@danskebank.com Brian Børsting Industrials +45 45 12 85 19 brbr@danskebank.com David Boyle Industrials & Norwegian HY +47 85 4 54 17 dboy@danskebank.com Jesper Damkjær Financials +45 45 12 8 41 damk@danskebank.com Bendik Engebretsen Industrials & Norwegian HY +47 85 4 69 14 bee@danskebank.com Christopher Hellesnes General Industrials +46 8 568 8547 cahe@danskebank.se Katrine Jensen Financials +45 45 12 8 56 katri@danskebank.com Louis Landeman Industrials, Real Estate +46 8 568 8524 llan@danskebank.com Jakob Magnussen Utilities, Energy +45 45 12 85 3 jakja@danskebank.com August Moberg Industrials & Construction +46 8 568 8593 aumo@danskebank.com Niklas Ripa Credit Portfolios +45 45 12 8 47 niri@danskebank.com Mads Rosendal Industrials, TMT +45 45 14 88 79 madro@danskebank.com Haseeb Syed Industrials & Norwegian HY +47 85 4 54 19 hsy@danskebank.com Find the latest Credit Research: : Danske Bank DCM Research: http://www.danskebank.com/danskemarketsresearch Bloomberg: DNSK<GO> 16
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