Norwegian Government spells the end for export finance lender

Moody's has today downgraded Eksportfinans' issuer and senior debt ratings a full seven notches to Ba1 from Aa3 as the Norwegian government's repeal of a 30-year old agreement spells the end for the company.

Eksportfinans had enjoyed a monopoly over government subsidised loans under the 108-agreement scheme which makes up 70% of Eksportfinans’ loan book. But on Friday, the Norwegian government decided to take control over these loans leaving Eksportfinans without a viable business model and in run-off.  

The decision not to grant permanent exemption from the EU's Capital Requirement Directive on 20 October had already led to a two notch downgrade from Aa1 to Aa3 by Moody’s, which sees these moves and the inability to find a solution, as a lack of commitment to Eksportfinans from the government and its owners.

Eksportfinans will provide transitional services to the government until July 2012 but will not issue new long term bonds other than to fund financing gaps in existing deals.

The institution is part owned by the Norwegian government as well as major nordic banks DNB, Nordea and Danske Bank. A press release from the company claims that is is solvent and liquid and would be run down in a controlled manner over several years.