Periods of drought when investor appetite for new issues on the Nordic bond market dries up limits that market‘s growth, said Jens F Gruner-Hegge, vice-president of corporate finance at London-based parcel tanker and tank terminals group Stolt-Nielsen.
The last time this happened was from 2H14, when a sharp fall in oil prices deterred investors and the Nordic bond market remained all but closed until last April, Gruner-Hegge explained at the weeklong Nor-Shipping 2015 exhibition in Lillestrøm, Norway. During that period, trading on the secondary market dried up significantly as well, and without an active secondary market, it is not possible to issue new debt on the primary business.
Companies such as Stolt-Nielsen, which are usually active on the krone bond market, need alternative sources of funding for those periods when the Nordic bond market is unavailable, he said, adding that this adds to the overall cost of financing the companies in question.
While most of the issues in Oslo continue to be based on the krone, some shipping companies have issued in US dollars since the market reopened some two months ago. Using the dollar cuts funding costs as it eliminates the need for krone-to-dollar currency conversions. As shipping companies have revenues in dollars, they want to avoid foreign exchange fluctuations.
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Marie Granlund, senior credit analyst at investment bank Alfred Berg, said companies that are not listed provide investors with less information, and what details they do provide are less frequent than those given by listed firms. Consequently, there is a direct link between the information investors receive and the price they are willing to pay for the debt of an issuer, she explained.