Nynas expects to be stronger after reorganization

STOCKHOLM—Processing oil manufacturer Nynas A.B. was set to formally exit its more than yearlong reorganization on Jan. 18 after completing the final hurdle to exit the process.

The District Court of Sodertorn on Nov. 30 approved a "composition proposal" by creditors that was to become effective Dec. 21. But the Swedish Tax Agency appealed that ruling on Dec. 21, delaying the process.

Nynas, however, said on Dec. 28 that the liability to the tax authority has been repaid since, and the agency withdrew its objection. Because of the appeal, the formal public composition will become effective Jan. 18 as no other objections were filed, according to the Stockholm-based company.

"Nynas comes out of the reorganization as a stronger company with a five-year secured financing and a strong balance sheet," Bo Askvik, Nynas president and CEO, said in a statement. "Together with our loyal customers and suppliers, we will vigorously move forward and continue to develop our business in all our global markets. We are ready to take back lost market share and more."

Nynas filed for administration in the Sodertorn District Court in December 2019 as banks had withdrawn credit facilities and it was unable to pay due debts. The financial problems partially were linked to sanctions imposed by the U.S. Treasury Department's Office of Foreign Asset Control on Nynas' 50 percent shareholder PDVSA of Venezuela.

As part of the restructuring, the company reduced PDVSA's share ownership to 15 percent in May, which consequently led to the OFAC's lifting of sanctions on Nynas. "This has meant that the company has been able to contract crude oil deliveries and to continue financing discussions under more favorable terms," the oil refiner said.

In addition, Nynas said it had to switch from Venezuelan crude as a major feedstock due to U.S. sanctions. The company approved and processed "several new feedstocks," following a change program at its refineries and supply chain.

"Nynas can now run our refineries with 100 percent non-Venezuelan feedstock without affecting the strict demands of our consistent product quality," it said.

With the new feedstock portfolio and the production upgrades, Nynas said it is able to increase and optimize utilization at its refineries and increase volumes. Furthermore, the Stockholm company said it had secured "good liquidity and cash flow" during the reorganization, due to a reduction in overdue customer payments, a granted deferral of tax payments and an agreement on inventory financing.

Moving forward stronger
Nynas said it is coming out of the reorganization as a stronger company financially, a situation that will benefit both its customers and suppliers.

"That should create trust on both ends of the business, on the supplier as well as on the customer side of the operation," the company said in response to emailed questions. "During the period of reorganization, we were able to serve our customers without major disruption. In reality, the impact we have seen in 2020 on the day-to-day operations from COVID-19 was significantly bigger."

During the reorganization process, in fact, Nynas said the impact on day-to-day operations was relatively limited, as the firm operates a network of global sales offices along with a network of depots.

"Operational activities are typically done by those units," Nynas said. "Being the interface close to the customer, they were largely not impacted by the work on the reorganization that was done mainly in Sweden. But there was, obviously, a need to communicate around the globe and to keep the information around the process up to date to keep trust of all the stakeholders."

With respects to its business supplying process oils for the tire and rubber industry, "we think our continued commitment to the industry is of value as it secures a supply and the ability to plan with our presence and our products in the future."

The Swedish firm sees a number of growth opportunities for its products aimed at the tire and rubber industry, including:

• Nynas expects the change to low aromatic oils that started in Europe in 2010 to continue. It said Brazil adapted similar legislation in 2016, and the next big market in line seems to be China, "the global powerhouse of tire production, where usage of high aromatic oils for domestic usage is not yet banned."

• The firm said the trend to use oils of lower aromaticity also is continuing into non-tire rubber goods, where REACH regulations in Europe address a similar issue.

• Ongoing changes in the refinery landscape—the ongoing closure of Group 1 refining capacity—represents another opportunity for Nynas to make further inroads in the market.

• Two other trends that the firm said could benefit are in the tire industry. First is the new European tire label regulations with the more demanding limits, pushing the performance of tires in terms of rolling resistance and wet grip. The other is new winter tire criteria, where naphthenic oils come with a built-in advantage. Nynas said it sees the potential for improved performance and security with rubber formulations based on its products.