Outlook 2018: Oslo capital markets continue growth into 2018

More US-listed companies are raising cash in Oslo to supplement New York offerings. Credit: Getty Images
More US-listed companies are raising cash in Oslo to supplement New York offerings. Credit: Getty Images

After years of shipping activity in the Oslo stock and bond markets being dominated by private placements related to corporate restructurings, more companies tapped the market for growth in 2017, and this year could see more of the same.

Shipping companies raised NOK1.85 billion (USD224 million) through equity issuances on the Oslo bourse in the first 10 months of 2017, up by 10% from the same period the year before, and offshore service companies raised NOK1.94 billion, down by 13%. These figures exclude funds raised on the over-the-counter (OTC) market, which is operated by the association of Norwegian stockbrokers rather than the bourse.

In the Norwegian bond market, shipping issuers raised NOK3.5 billion in the first 10 months of last year, up by 600% from the same period in 2016, and offshore service companies raised NOK1.49 billion, up by 35%.

A key driver of activity in the Norwegian bond market has been fundraising by owners with US-listed equity. Christian Moxon, head of the US office of Pareto Securities, said at a Marine Money forum in November 2017, “The Nordic bond market has seen increased activity for shipping. Historically, these bonds have been mainly unsecured, but [in 2017], we’ve seen issuers do secured deals to replace bank debt with bond debt.

“For some, it comes with an easier amortisation schedule, which is probably needed in a difficult market where you want to reduce your break even. In many cases, it also ties up less capital in terms of restricted cash, so despite having a higher interest coupon [than bank debt], it can be the right product for a lot of companies.

“The market is also growing in terms of new issuers. We’re seeing a lot of international companies using the Nordic bond template, and we expect that number to continue to grow.” In general, Moxon expects the Nordic bond market’s share of shipping’s overall capital structure “to grow significantly over the next couple of years”.

According to statistics compiled by IHS Markit, USD944 million was raised in November via seven Norwegian bond offerings by six US-listed companies: Teekay LNG, Navigator Holdings, Golar LNG Partners, Euronav (which made two offerings), Ship Finance International, and Eagle Bulk.

Although restructurings still played a major role in both the equity and bond markets last year, a moderate recovery in container and dry bulk shipping freight markets brought fresh life to Oslo. MPC Container Ships, a tonnage provider that focuses on vessels in the 1,000–3,000 teu range, went public last May, only the second Oslo IPO since 2014, following Songa Bulk’s 2016 debut.

In the OTC market, the emergence in 2017 of newcomers such as GoodBulk, Navios Maritime Containers, and 2020 Bulkers confirmed a growing investor interest in shipping.

The outlook in the offshore services sector remains challenging, but a window has opened for companies acquiring low-priced assets. Borr Drilling went public in Oslo in October 2017 to capitalise on the low valuation of jackup rigs.

Activity in both the Norwegian equity and bond markets is likely to respond to a recovery in freight rates in various shipping segments. As of late November 2017, the shipping index of the Oslo Stock Exchange was up by about 25% year on year. Although past performance is no guarantee of the future, the index implies that investor sentiment towards the industry is on the rise.

Access the 2018 outlook page