Nordic Credit Rating has placed its 'A-' long-term issuer rating on Norway-based defence and maritime technology supplier Kongsberg Gruppen ASA on watch developing. The 'N2' short-term issuer rating and the 'A-' senior unsecured issue rating have also been placed on watch developing.
Rating rationale
The watch placement follows Kongsberg Gruppen's plan to separate its Maritime division into a standalone company with a separate listing on the Oslo Stock Exchange. The largest shareholder, the Norwegian state, has indicated support for the proposed split, and its ownership stake in each company will remain unchanged following the demerger. The demerger is expected to close in the second quarter of 2026, following an extraordinary general meeting in January. Further information on the two companies' operations and respective capital structures is expected in December.
The remaining Defence & Aerospace and Discovery divisions are experiencing strong growth in civilian and defence applications in Europe and the US. The formation of two separate companies is intended to enable each to better address its respective market demands. The company believes that recent expansion in both businesses has provided sufficient scale for independent operation, and that remaining synergies are no longer sufficient to offset the expected benefits of operating as more focused, specialised entities.
We believe the transaction is likely to increase business risk for the future Kongsberg entity. The exclusion of the maritime business significantly reduces scale and diversification. The defence business, while strong in its defined niches, is a small player in the global defence industry. Furthermore, the cyclicality of each business area has been mitigated by low correlation between the defence and maritime businesses over time.
While the business risk impacts are foreseeable, the implications for financial risk remain uncertain. Kongsberg Maritime represents about a third of EBITDA, and the implications for credit risk metrics will depend on the split of cash and debt between the two future companies. However, we expect the remaining Kongsberg operations to continue to benefit from increased defence spending across Europe, supporting revenue and cash flow generation.
Watch developing
The watch placement reflects uncertainty regarding the final capital structure of the remaining Kongsberg. In particular, it is unclear how debt and available cash will be allocated. We expect to resolve the watch placement once there is clarity on the future capitalisation of Kongsberg Gruppen. The company has announced it will prepare a demerger plan to be presented in December, followed by an extraordinary general meeting in January to decide on the proposed demerger. Absent further uncertainty regarding the new listing planned for April 2026, we expect to resolve this watch by early 2026.
Our primary expectation is that we will affirm the rating, with a final capital structure that remains strong, with continued strong demand, operating efficiency and profitability for the remaining business. We also anticipate that the Norwegian government will retain its ownership position in the new company. The anticipated affirmation reflects the likelihood that improved investor sentiment behind our previous positive outlook will offset a weaker business risk profile and moderate increase in financial leverage.
Although less likely, we could raise or lower the rating if the government's ownership changes materially or the final capital structure deviates meaningfully from our expectation. For example, if the transfer of debt and cash to the new company results in considerably weaker leverage or cash flow metrics for Kongsberg Gruppen.
| Rating list | To | From |
|---|---|---|
| Long-term issuer credit rating: | A- | A- |
| Outlook: | Positive | |
| Watch: | Watch Developing | |
| Short-term issuer credit rating: | N2 | N2 |
| Senior unsecured issue rating: | A- | A- |
Contacts:
Elisabeth Adebäck, analyst, +46700442775,
elisabeth.adeback@nordiccreditrating.com
Geir Kristiansen, analyst, +4790784593,
geir.kristiansen@nordiccreditrating.com
Sean Cotten, chief rating officer, +46735600337,
sean.cotten@nordiccreditrating.com
The methodology documents used for this rating are NCR's Corporate Rating Methodology published on 8 May 2023, NCR's Rating Principles published on 14 Feb. 2024 and NCR's Group and Government Support Rating Methodology published on 14 Feb. 2024. For the full
regulatory disclaimer please see the rating report.