The Caa3 CFR and negative outlook reflects Norske Skog's weaker than expected profitability and cash flow generation in 2015. Its high exposure to the mature publication paper market in Europe and Australia weighs on the company's ability to improve profitability. Recently announced investments in growth projects, namely biogas and tissue production as well as the acquisition of a New Zealand-based wood pellet production to diversify away from the traditional publication paper market are not sufficient to materially offset challenging market conditions in its paper operations. We note that these investments will only moderately improve profit generation over time. Nevertheless, the incremental profits from the investments as well as slight improvements in paper prices during 2016 should help to improve profitability, which subject to the reduction and extension of near-term maturities would ease the immediate refinancing pressure until 2019 and would therefore be credit positive.