Souring Bond Deals Threaten to Undermine a Nordic Credit Boom

(Bloomberg) — A succession of Nordic bond deals that sank after issuance is leading long term investors to fret about the reputation of this rapidly burgeoning market.

Sales have surged in recent years because of its appeal to companies seeking to borrow smaller amounts without incurring the cost of obtaining a credit rating. With the heady growth has come fears of a deterioration in credit quality, and the blame is being laid on firms from outside the Nordic region.

The latest incident involves German cosmetics company LR Health & Beauty SE, which agreed a deal with bondholders this month that will see nearly a third of its note written off. That follows an ongoing court-enforced restructuring at investment firm Nordwest Industrie Group and a slide in KKR & Co.-backed Dutch firm Flora Food Group’s first Nordic bond.

“Most of the high profile difficulties we’ve seen in the market have come from non-Nordic companies,” said Juhamatti Pukka, head of fixed income at Finnish investor Evli Fund Management. “When you see a non-Nordic company, it is not a red flag necessarily, but it might be a yellow or orange flag.”

There were more than $8.6 billion of Nordic corporate bonds issued last year in dollars, euros or pounds by companies based outside the region, up a quarter on the previous year and almost five times the amount seen in 2023, according to data compiled by Bloomberg. These deals are typically backed by hedge funds, asset managers, special situations funds and family offices.

The case of LR Health is a cautionary tale for investors looking at these foreign deals. The firm caught creditors off-guard shortly after issuing its Swedish-law bond in February 2024, announcing it would get a new major shareholder, Evoco.

The shift did not result in a change-of-control covenant coming into play, which allows lenders to be repaid in the event of a switch of owner. Rather, the debt term was structured so that it wasn’t triggered even when majority ownership of LR Health’s holding company was transferred, leaving bondholders at the mercy of the new owner.

Then in 2025 the firm, which enlists ordinary people to sell its cosmetics, perfumes and dietary supplements, warned it may breach the covenants of the €130 million ($153 million) note. The severity of the restructuring quickly deepened from a simple covenant waiver to a full-blown restructuring. LR Health declined to comment.

Nordwest Industrie also entered restructuring proceedings within a year of issuing its first bond. A representative said all measures taken as part of the restructuring are specifically designed to protect investors.

“In this respect, the actions of the NWI Group are an example of how carefully the capital provided by investors is protected,” said Holger Römer, head of corporate communication at the company.

Meanwhile, Flora Food’s note now trades at a 17% discount to face value, just eight months after the deal priced, as the company’s leverage and interest coverage has remained weak. The bond itself represents only a thin layer of unsecured debt in a large capital structure, with a significant amount of secured funding ahead of it. Flora Food did not respond to requests for comment.

“The question is for how long this can go on,” said Tobias Moser at DMR Legal, a lawyer who has advised on the restructuring of Nordic bonds issued by German companies. Arrangers of Nordic bonds “have the demand from issuers and investors, but can they say no to issuers who will hurt the product?”

Weaker Terms

Investors are noting that some debt terms are starting to weaken. Certain borrower-friendly adjustments are starting to creep in, according to Daniel Herdt, a portfolio manager at Lazard Asset Management. These could allow cash to leak out of the business, for example.

“Some of the credit cases lack some of the quality standards we would like to see,” he said, noting that non-Nordic issuers may still “try to find out what’s possible and what’s not possible in the market.”

There has already been evidence of investor pushback on deals perceived as riskier.

Iberconsa, a Spanish frozen fish producer owned by private equity firm Platinum Equity, dropped plans to issue a Nordic bond last year. While S&P Global Ratings said in a report it expected the company’s credit metrics to improve, it warned profitability largely depended on the fluctuation of the Argentinian peso. Such a risk and the emerging-markets exposure was a step too far for some investors’ mandates, according to market participants.

Iberconsa did not respond to a request for comment.

Two-Tiered Market

The fact that investors have not underwritten everything that has come their way lately has helped calm some fears about excessive market exuberance. But there is already a sense of a bifurcation in the market beginning to manifest between Nordic and non-Nordic issuers, with some funds gravitating toward more well-known, domestic issuers.

“There might be a slight reputational risk associated with a higher share of non-Nordic issuers failing; however, we are not too concerned about this,” said Alexander Gallotti, head of leveraged finance at Helsinki-based investor Mandatum. “From our perspective, the market is two tiered, and for us – and our Nordic High Yield fund – the focus is on the “pure Nordic” part of the market.”

Some also worry that newer investors — such as foreign family offices — could get cold feet, prompting volatility in pricing. More than two thirds of investors who took part in bond sales under local Nordic laws in 2025 came from outside of the region, compared to around 40% in 2021, according to data from Pareto Securities.

“When things become tough, the more marginal investors will pull out of the market,” said Morten E. Astrup, chief investment officer and founding partner of Oslo-based Storm Capital Management. “That is natural and we’ve seen it before.”

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