Stena Line Bonds: A Better Deal Than Duty Free

by Matt McCleery

At a price of 74, a yield of nearly 17% and unencumbered asset coverage of about 2x, we think Stena Line’s $300 million in 10.625% notes due 2008 might well represent one of the best opportunities in the shipping high yield market. In the following analysis, we’ll tell you why we think that if the company proves in the next two quarters that it can cope with life after duty free, these bonds may move back up into the low 90s.

As we see it, there are two reasons for the decline in price of Stena Line bonds. The first reason is the company’s very poor 1998 result. The second reason is uncertainty about how the company will look in the post-duty free era. Our executive summary is that a) 1998 was poor for non-recurring reasons and b) early indications are that the company will be able to manage post-duty free. We will take each of these points in turn.

This is only an excerpt of Stena Line Bonds: A Better Deal Than Duty Free

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