SEB Norwegian Credit Weekly

Henrik Blymke +47 22 82 71 91 Alexander Jost +47 22 82 67 12 Øystein Bogfjellmo +47 22 82 71 28

15 September 2015

Please note: the statement at the rear of this report contains details of investment banking services recently provided by SEB which could be considered relevant to the subject matter of this report.

1 15 September 2015

Corporates - Primary Several IG primary deals last week

Monthly primary volume (NOK bn) Primary volume comment

Annual primary volume (NOK bn)

Source for all charts on this page: Stamdata, SEB

We saw high activity in the IG primary market last week with bonds issued by Posten Norge AS, Fjellinjen AS, Agder Energi AS, Lyse AS and Helgeland Kraftlag A/L. The high activity seems to be continuing this week with Olav Thon Eiendomsselskap AS issuing a 2Y SEK 300m senior unsecured bond with quarterly coupon of STIBOR+80bps p.a. and Statkraft AS issuing a 8Y EUR 500m bond with an annual coupon of 1.5%.

In the HY market, Norwegian Air Shuttle ASA last week completed a tap issue of NOK 425m in the unsecured bond NAS04 maturing in July 2017 (total outstanding now NOK 825 m).

Selected announced primary deals

Issuer Sector Issue Date Maturity Spread Currency Volume

Posten Norge AS Transportation & Logistics 11.09.2015 28.09.2022 Fixed 2.63% NOK 350m

Helgeland Kraftlag A/L Power Generation 09.09.2015 15.09.2020 3MNIBOR+105bsp NOK 130m

Posten Norge AS Transportation & Logistics 08.09.2015 21.09.2018 3MNIBOR+60bsp NOK 275m

Posten Norge AS Transportation & Logistics 08.09.2015 21.09.2020 3MNIBOR+79bsp NOK 375m

Agder Energi AS Utilities 08.09.2015 16.03.2021 3MNIBOR+100bsp NOK 250m

Lyse AS Utilities 08.09.2015 11.09.2025 Fixed 3.30% NOK 300m

Fjellinjen Financial Services 07.09.2015 15.09.2020 3MNIBOR+65bsp NOK 500m

2 15 September 2015

Secondary corporate volumes increased last week by NOK 0.5bn to NOK 1.9bn driven by higher volumes within the HY space.

Our IG index widened 1bp w-o-w to +67bp, while our BB index and B index widened by 38bp to +734bp and by 71bp to +1458bp, respectively.

Eidesvik Offshore ASA (EIOF01) widened the most by 762bp to +2,186bp followed by a widening of 201bp for Odfjell SE (ODF04) to +1,011bp. However, Norwegian Energy Company AS (NOR10) tightened the most by 418bp to +1,679bp.

Norwegian Air Shuttle AS (NAS04) saw the highest volume with a total volume of NOK 419m, followed by Sporveien Oslo AS (SPOR01PRO) with a total volume of NOK 115m.

Corporates – Secondary Higher volumes and spread widening for HY bonds Secondary volumes by week (NOKbn) Secondary volume comment

Significant transactions – spread change (left) and volumes (right) SEB index - Investment grade (left) & BB/B/CCC (right)

Source for all charts on this page: Stamdata, Oslo Børs, SEB

3 15 September 2015

Nordic HY update – Where to be in a challenging market: We published our Nordic HY update on Tuesday 15 September. In terms of recommendation we highlight the Millicom 2020 USD bond and the Nokia USD 2019 bond. Both look attractive versus their SEK and EUR equivalents. In EUR we find SSAB 2019 interesting, offering a significant pick-up compared with its SEK equivalents. In the SEK BB space we highlight Swedish Orphan Biovitrum and in the SEK B-rating category NSP. As an alternative to corporate high yield we favour the Volvo and Dong hybrids and Danske Bank AT1. Of our least preferred bonds we flag Aker Solutions (NOK bonds), StoraEnso (EUR bonds) and Meda (SEK bonds).

Aker Solutions Credit Update – Tough times get tougher: The financial liquidity in AKSO is still robust as pointed out in our Q2 update in July (Outlook changed to negative) with a liquidity buffer of NOK 6.0bn including NOK 4.0bn in undrawn facilities. However, credit metrics are deteriorating with an increase in the leverage ratio excluding leases and a decrease in interest cover. Moreover, since the Q2 report the market outlook has weakened further and we have cut our order intake assumptions and estimates. The company continues to face headwinds from lower capital spending budgets among oil and gas companies as described in our E&P spending report (Pitch dark before any shimmer of light) published 27 August. Projects for subsea, MMO and engineering are now constantly being postponed as oil and gas companies seek capex and cost reductions. As a result, we expect competition for contracts to be very tough resulting in a declining book-to-bill ratio due to less contract awards and lower margins. Therefore, we believe the current backlog of NOK 44.0bn will decline significantly in the next couple of years to slightly above NOK 30.0bn in 2017. From a credit perspective we see continued higher business risks and we keep our BB+ rating with negative outlook, which was changed from stable after the Q2 presentation in July.

Höegh LNG raises NOK 844m: Höegh LNG announced that it has raised NOK 844 million in gross proceeds through a private placement of 6,920,000 new common shares. The private placement represents 9.90% of the current outstanding shares. It was over-subscribed at the subscription price and supported by existing and new institutional investors.

Schibsted successfully raised NOK 2.6bn in B-shares offering: Schibsted successfully raised NOK 2.6bn in new equity. In isolation this was credit positive, but also expected by us as we mentioned in our Q2 update on the company.

Seadrill cancels West Mira newbuild contract: Seadrill announced that it has cancelled its newbuilding contract for the West Mira with Hyundai Heavy Industries (“HHI”). The rig was originally scheduled for commencing a five year contract with Husky Oil for USD 590,000 per day. (USD 1bn in revenue backlog). In its Q2 report, Seadrill reported that it had tentatively agreed to renegotiate the day rate for the contract (due to the late delivery of the West Mira). The announcement today also mentions that Seadrill remains in discussion with Husky to find an alternative solution to meet its drilling requirements. Should the company manage to employ one of its current idle rigs, in addition to recoup the USD 168m in pre-delivery instalments (instead of having a capex outlay significantly above what the current market price of UDWs) this should be supportive for bond spreads.

News comment Nordic HY update, AKSO credit update, Höegh LNG private placement, Schibsted and Seadrill

Credit Research comments on selected news

Source for all charts on this page: Oslo Børs and Bloomberg

4 15 September 2015

The cautious trading during last week (iTraxx continues to widen) was likely due to uncertainty ahead of the Fed’s rate decision on Thursday. Although market pricing indicates a probability of 26% for a first hike on Thursday, it may not reflect fully market expectations. According to Bloomberg, a thin majority (51 out of 96 analysts) expect an interest rate increase. We also expect the Fed to raise interest rates on Thursday, although the decision seems like a 50/50 case.

Michigan consumer confidence fell to one year lows on Friday. The expectation component fell to the levels seen last time in 2013 while the one-year inflation expectation increased by 0.1pp to 2.9%. Retail sales in China, published over the weekend, were slightly stronger than expected, rising by 10.8% y-o-y. However, industrial production (6.5% y-o-y) and investments (10.9% y-o-y) did not meet expectations, with investment showing the weakest growth in 15 years.

International markets iTraxx indices continues to widen and uncertainty ahead of the Fed’s rate decision on Thursday

iTraxx Comments

Stock market and VIX Week ahead - key economic indicators and events: 14 Sep – 20 Sep , 2015 – Link to report

Source for all charts on this page: Bloomberg, SEB

Tue 15 Thu 1710.30 UK CPI | RPI | core yoy Aug 09.30 SWI SNB rate announcement 11.00 GER ZEW current | expectations Sep 20.00 US FOMC rate announcement (press.conf.20.30)14.30 US Retail sales mom | ex.auto | ex. auto & gas Aug15.15 US Ind.prod. Mom | ex. Auto | ex. Auto & gas Aug Fri 18

14.30 CAN CPI | core AugWed 1609.30 SWE Riksbank releases minutes from 2 Sep meeting10.30 UK Jobless claims change Aug14.30 US CPI | ex. Food & energy Aug

5 15 September 2015

Global credit curves, total return and swap rates

Spread (over Libor) per rating category IG iBoxx, total return (USD)

Spread (over Libor) per rating category HY iBoxx USD liquid HY Index, total return

Three months Libor, Euribor and Nibor (%)

USD, EUR and NOK Swap rates (%)

Source for all charts on this page: Moody’s, Bloomberg

6 15 September 2015

SEB Credit Research coverage

Sorted by name Sorted by name

Nordic coverage - with responsible analyst

Company Country rating* Outlook Responsible analystA.P. Møller-Mærsk Denmark A- Stable Øystein BogfjellmoABB Sweden A Stable Anders ErikssonAhlstrom Finland B+ Stable Lasse RimpiAker ASA Norway BB+ Stable Øystein BogfjellmoAker Solutions Norway BB+ Negative Øystein BogfjellmoAlfa Laval Sweden BBB+ Stable Anders ErikssonArla Denmark BBB Negative Mats NyströmAtea Norway BBB- Stable Henrik BlymkeAtlas Copco Sweden A Stable Anders ErikssonAtrium Ljungberg Sweden BBB Stable Michael AnderssonBillerudKorsnäs Sweden BBB- Stable Ebba LindahlBorregaard Norway BBB Stable Henrik BlymkeBW Offshore Norway BB+ Stable Øystein BogfjellmoCarlsberg Denmark BBB Negative Mats NyströmCramo Finland BB Stable Lasse RimpiDanfoss Denmark BBB Stable Michael AnderssonDanish Crown Denmark BBB- Stable Mats NyströmDet norske oljeselskap Norway BB Negative Øystein BogfjellmoDFDS Denmark BB+ Positive Henrik BlymkeDolphin Group Norway CCC+ Negative Øystein BogfjellmoDong Energy Denmark BBB+ Stable Ebba LindahlEG Gruppen Denmark B+ Stable Fredrik HössjerElectrolux Sweden BBB+ Watch Negative Mats NyströmElekta Sweden BBB Stable Ebba LindahlElisa Finland BBB Stable Lasse RimpiEntra Eiendom Norway A- StableEricsson Sweden BBB+ Stable Mats NyströmFortum Finland BBB+ Stable Ebba LindahlFortum Värme Sweden BBB+ Stable Ebba LindahlFred Olsen Energy Norway BB+ Negative Alexander JostGasLog USA BB- Stable Alexander JostGetinge Sweden BB+ Negative Ebba LindahlGolden Heights Sweden B+ Stable Fredrik HössjerHaldor Topsoe Denmark BBB Negative Mats NyströmHeidelbergCement AG Germany BBB- Stable Vitali Morgovski

Company Country rating* Outlook Responsible analystHeimstaden Sweden BB Stable Michael AnderssonHemfosa Sweden BB Stable Michael AnderssonHemsö Fastighets AB Sweden BBB+ Stable Michael AnderssonHexagon Sweden BBB+ Stable Mats NyströmHoist Finance Sweden BB Stable Fredrik HössjerHufvudstaden Sweden A- Stable Michael AnderssonHuhtamaki Finland BBB- Stable Lasse RimpiHusqvarna Sweden BBB- Stable Mats NyströmHöegh LNG Norway B+ Stable Alexander JostICA Gruppen Sweden BBB Stable Mats NyströmIkano Bank Sweden BBB Stable David RostedtIkano Bostad Stockholm Holding Sweden BB+ Stable Michael AnderssonIM Skaugen Norway CCC+ Negative Alexander JostInvestor Sweden A+ Stable Michael AnderssonJ. Lauritzen Norway B Negative Alexander JostJernhusen AB Sweden A Stable Michael AnderssonJotun Norway A- Stable Henrik BlymkeKemira Finland BBB- StableKinnevik Sweden A- Stable Michael AnderssonKongsberg Gruppen Norway A- Negative Øystein BogfjellmoLandshypotek Bank Sweden A- Negative David RostedtLifco Sweden BBB- Stable Mats NyströmLänsförsäkringar Bank Sweden A Stable David RostedtMeda Sweden BB- Stable Ebba LindahlMetso Finland BBB+ Stable Lasse RimpiMetsä Board Finland BB Stable Lasse RimpiMillicom Sweden BB+ Stable Fredrik HössjerMTG Sweden BBB Negative Mats NyströmNavigator Holdings LTD USA B+ Positive Alexander JostNCC Sweden BBB- Negative Michael AnderssonNeste Finland BBB- Positive Lasse RimpiNobina Sweden B Positive Michael AnderssonNokia Finland BB Stable Mats NyströmNorth Atlantic Drilling Norway B Negative Alexander JostNortura Norway BBB- Stable Henrik Blymke

7 15 September 2015

Sorted by name

SEB Credit Research coverage, continued Nordic coverage - with responsible analyst

Sorted by name Company Country rating* Outlook Responsible analystNorwegian Property Norway BBB- StableNSP Sweden B+ Negative Ebba LindahlNynas Sweden B+ Stable Fredrik HössjerOcean Yield ASA Norway BB- Positive Alexander JostOlav Thon Eiendomsselskap Norway BBB+ StableOrc Group Holding Sweden B Negative Fredrik HössjerOrkla Norway A- Stable Henrik BlymkeOutokumpu Finland B Stable Lasse RimpiOutotec Finland BB+ Stable Lasse RimpiPolarcus Norway CCC+ Negative Øystein BogfjellmoPostNord Sweden BBB+ Negative Ebba LindahlProsafe Norway BB+ Negative Alexander JostRamirent Finland BB+ Stable Lasse RimpiREC Silicon Norway B Stable Henrik BlymkeSaab Sweden BBB+ Negative Anders ErikssonSampo Finland BBB Positive David RostedtSandvik Sweden BBB Stable Anders ErikssonSAS Sweden B- Stable Henrik BlymkeSBAB Sweden A- Stable David RostedtSCA Sweden BBB+ Stable Mats NyströmSchibsted Norway BBB Stable Henrik BlymkeSeadrill Norway BB- Negative Alexander JostSecuritas Sweden BBB Stable Mats NyströmSkandiabanken Sweden A- Stable David RostedtSkanska Sweden BBB Stable Michael AnderssonSKF Sweden BBB Stable Anders ErikssonSonga Offshore Norway B- Negative Alexander JostSparbanken Syd Sweden BBB+ Stable David RostedtSponda Finland BBB- Stable Lasse RimpiSporveien Oslo AS Norway A- Stable Henrik BlymkeSSAB Sweden BB- Stable Lasse RimpiStatkraft Norway BBB+ Stable Ebba LindahlStatoil Norway AA- Stable Øystein BogfjellmoSteen & Strøm Norway BBB+ StableStena Metall Ab Norway BB+ Postive Henrik Blymke

Company Country rating* Outlook Responsible analystStora Enso Finland BB Stable Lasse RimpiSwedavia Sweden A- Stable Michael AnderssonSwedish Match Sweden BBB Stable Mats NyströmSwedish Orphan Biovitrum Sweden BB- Stable Ebba LindahlTallink Grupp Estonia BB Stable Henrik BlymkeTDC Denmark BBB- Stable Vitali MorgovskiTele2 Sweden BBB Stable Fredrik HössjerTeliaSonera Sweden A- Negative Vitali MorgovskiThon Holding Norway BBB+ StableThyssenKrupp Germany BB+ Stable Vitali MorgovskiTVO Finland BBB Negative Ebba LindahlVacse Sweden BBB Positive Michael AnderssonVasakronan Sweden A- Stable Ebba LindahlVattenfall Sweden BBB+ Negative Ebba LindahlVeidekke Norway BBB Stable Henrik BlymkeVolvo Sweden BBB Positive Anders ErikssonVolvofinans Bank Sweden BBB Positive David RostedtWilh.Wilhelmsen ASA Norway BBB- Stable Henrik BlymkeÅF Sweden BBB- Stable Michael AnderssonÅlandsbanken Finland BBB- Negative David Rostedt

8 15 September 2015

Available credit research publications and contact details SEB Credit Research, P.O. Box 1843 Vika, 0123 Oslo

Instant Credit comments

Credit Insights

SEB’s CFO Index

Nordic HY Update

Sector / Thematic updates

Henrik Blymke

Senior Credit Analyst

+47 22 82 71 91

Main coverage: Industrial HY and IG companies

John Østreim Head of Credit Research Norway

Credit Research Analyst

Alexander Jost

Credit Analyst

+47 22 82 67 12

Coverage: High Yields, Rigs, Shipping

Nordic Credit Research publications

Norwegian Credit Research publications

Norwegian Credit Weekly

Norwegian HY & IG Updates

Norwegian Utility Report

Norwegian banks report

Sector / Thematic updates

Credit Research Analyst

Øystein Bogfjellmo

Credit Analyst

+47 22 82 71 28

Coverage: High Yields, Oil Service, Oil & Gas

9 15 September 2015

Authors' statement of independence (Analyst Certification) We, the authors of this report, hereby confirm that notwithstanding the existence of any such potential conflicts of interest referred to herein, the views expressed in this report accurately reflect our personal views about the companies and securities covered. We further confirm that we have not been, nor are or will be, receiving direct or indirect compensation in exchange for expressing any of the views or the specific recommendation contained in the report. None of the authors of this research report are registered or qualified as a research analyst, representative or associated person under the rules of the FINRA, the New York Stock Exchange any other US regulatory organization or the laws, rules or regulations of any State in the USA.

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10 15 September 2015

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Company specific disclosures and potential conflicts of interest: SEB acted as Joint Bookrunner of the private placement of Schibsted's B-shares, as completed on 10th September 2015. In addition, it advised the Company on its share split in June 2015. This report has been produced by SEB Research, which is separated from its Investment Banking division by information barriers; as such, it is independent and based solely on publicly available information. A member of, or an entity associated with, SEB or its affiliates, officers, directors, employees or shareholders of such members (a) has never been represented on the board of or similar supervisory entity of the companies mentioned in the report, (b) has from time to time bought or sold the securities issued by the companies referred to in this report or options relating to these companies, (c) SEB or its affiliates beneficially own less than 1 % of a class of common equity securities of the remaining companies mentioned in the report, as of 14 Sep 2015, and (d) SEB or its affiliates beneficially own debt securities of Aker Solutions but not of the remaining companies mentioned in this report, as of 14 Sep 2015. SEB or its affiliates is, or has within the last 12 months been or expects in the next 3 months to be, party to an agreement relating to the provision of investment banking services to Schibsted or an affiliate, or has received from it fees or the promise of fees in respect of such services.

Within the past 12 months, SEB or its affiliates acted as Lead or Co-Lead Manager in a public offering of securities of Schibsted. The analysts responsible for this report (jointly with their closely related persons) may hold shares or other instruments related to the companies mentioned in this report. Please refer to published reports on the individual companies for details. The information can also be found on our website, at the following address: www.sebenskilda.se.

11 15 September 2015

Explanation of Credit Research recommendations: SEB derives its Recommendations from its appraisal of the Credit Rating of the issuer (itself derived from business risk profile and financial risk profile and from other factors). Explanation of Credit Research recommendations: SEB derives its Recommendations from its appraisal of the Credit Rating of the issuer (itself derived from business risk profile and financial risk profile and from other factors). SEB uses the following recommendation system for the corporate bond market: Overweight – over the next six months we expect a position in this instrument to exceed the relevant index, sector or benchmark. Marketweight – over the next six months we expect a position in this instrument to perform in line with the relevant index, sector or benchmark. Underweight – over the next six months we expect a position in this instrument to underperform the relevant index, sector or benchmark. SEB uses the following recommendation system for CDS spreadsheets: Buy – we expect the CDS to outperform the sector performance Neutral – we take a neutral view on the CDS, and do not recommend either a buy or sell Sell – we expect the CDS spreads to underperform the sector performance. Credit Watch Negative – When an identifiable event or short term trend has occurred and when additional information is needed to evaluate the impact on the current rating but the likely outcome is a negative rating change. Credit Watch Positive - When an identifiable event or short term trend has occurred and when additional information is needed to evaluate the impact on the current rating but the likely outcome is a positive rating change. Credit Watch Developing – When an identifiable event or short term trend has occurred and when additional information is needed to evaluate the impact on the current rating and the likely outcome is uncertain SEB also assigns credit ratings, definitions of which can be found on our website: https://taz.vv.sebank.se/cgi-bin/pts3/mc6/MB/research.nsf?opendatabase&login Methodology SEB’s Credit Research assigns its credit rating to an issuer based on the assessment of an issuer’s business risk profile as well as its financial risk profile. The business risk profile includes country risk, industry risk, competitive position, and profitability. The financial risk profile includes financial policies, accounting, cash flow adequacy, capital structure and liquidity. The outcome of the assessment of the two risk profiles is weighed together for a final overall rating. In addition to SEB’s credit rating assessment, other factors considered in a particular issuer include the credit ratings assigned to a specific issuer by independent agencies, the value and market price of its securities, macroeconomic factors such as interest rates, promised coupon or yield of the specific instruments, and historical spread developments. Credit Research Distribution (as of 1 Sep 2015)

A* B*

Overweight 14.0% 2.0%

Marketweight 67.3% 15.5%

Underweight 18.7% 3.8%

A* denotes recommendations for all companies covered Recommendation History Please refer to individual published reports for recommendation history of the companies covered within this report

12 15 September 2015

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