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The lending capacity of Norway's banks has decreased significantly since the start of the global financial turmoil. Although Norwegian financial institutions remain solid compared to many banks in surrounding countries, it has become much more difficult for the business sector and private households to obtain credit....

The lending capacity of Norway's banks has decreased significantly since the start of the global financial turmoil. Although Norwegian financial institutions remain solid compared to many banks in surrounding countries, it has become much more difficult for the business sector and private households to obtain credit.

In 2008, the Norwegian government approved a NKr350 billion (€40 billion) bond package to help banks improve liquidity – an astonishing amount of money for a country of just over 4.5 million people. It confirmed Norway's position as one of the richest countries in the world with billions of dollars from oil revenues coming in every month.

To illustrate their wealth, the Norwegian Government has set up a Pension Fund, one of the world's largest retirement funds worth an approximately NKr1275 billion (€160 billion).

Nevertheless, when the price of oil fell sharply, Norway experienced one of its most significant economic downturns in history.

"There is a significant change since the summer of 2008," says one senior lawyer. "The banking and finance workload decreased immensely. Since the autumn of 2008 the nature of work has changed. Now more distressed loans, claims for people in bad structured financial projects, mergers of banks and corporations [dominate]. Clients feel the recession."

Norway was unable to escape the global economic downturn. During the last quarter of 2008 and in 2009 there were notably fewer listings and a lower volume of corporate finance activity....

Norway was unable to escape the global economic downturn. During the last quarter of 2008 and in 2009 there were notably fewer listings and a lower volume of corporate finance activity. "2006 was a top year in the US, 2007 in Europe and 2008 in Norway," says one senior partner. "Fewer deals are closed. There is less work and the nature of the work has changed."

"Norway was hit a bit later than many other countries," says one lawyer. "We only saw the effect following the fall of Lehman [Brothers]."

"There has not been a single IPO this year," says one partner. "Oslo has been the most active stock exchange this year, after London, with new listings, but not one new IPO."

Nevertheless, high oil prices and a relatively low exposure of Scandinavian banks to American real-estate markets protected Norway from the worst excesses of the sub-prime crisis.

The public M&A market has remained relatively strong, so the capital markets are working to finance takeovers. Rights issues were an important part of the work available.

"Historically the Norwegian capital markets are dominated by the magic circle of the traditional big players: Thomessen, Wiersholm, Wikborg Rein and BA-HR," says one senior lawyer. "Things do not change here overnight. Even an economic storm hardly rocks Norway's stability."

"Since the summer of 2008 there is a significant downturn," says one senior lawyer. "At the moment there are not many deals, the high activity of last year is gone....

"Since the summer of 2008 there is a significant downturn," says one senior lawyer. "At the moment there are not many deals, the high activity of last year is gone." Just like most countries, Norway's M&A market has been hit hard by the economic storm. It has not come to a complete standstill, but it definitely has calmed down significantly.

Ever since the economic turmoil reached Norway in the autumn of 2008, it has faced a number of problems. The country certainly did not benefit from the tumbling oil prices as well as falling shipping rates.

"The market pretty much dried up," says a senior partner. "Lots of transactions in the planning [stage], but not much are happening." The beginning of 2009 saw a shift in work: restructuring, refinancing, renegotiating contracts and labour law have become the most important practice areas and some firms have recognised the need to make changes within their departments.

"We have moved people internally. Most work is focussed on refinancing and international restructuring," says one lawyer. However, cautiously, lawyers are starting to make positive predictions. "The first half of this year was very slow," says one lawyer. "But we see activity picking up again. Major new assignments are coming up, mostly acquisitions."