Stena - Cash vs CDS
All,
Please find our unchanged analysis here.
That the SUNs be taken out first may have been part of our extended thesis (upside from orphaning) for selling the CDS, but so far we are not seeing the benefit.
Orphaning:
- Stena are tendering for $250m of their %527m outstanding SUNs at AB level for $102 + plus a premium of 30 bps. Deadline is June 1st. The SUNs and Stena AB are the reference bond/entity for the CSD. But as long as any of the SUNs remain outstanding, there will be no orphaning and even when they are all taken out, we are never quite 100% comfortable with ISDA’s decision making.
- We might have taken out the “pesky" 2020 bonds instead, but the SUNs are the highest yielding and biggest coupon bonds Stena has outstanding.
Liquidity:
Stena have hoarded significant liquidity in the first quarter of this calendar year, having sold its Dutch residential real estate portfolio and received payment from Samsung Heavy. On the last call, management had indicated that the liquidity be used to reduce drawings under its RCFs, but clearly, management felt it had $250m to spare.
Cash vs CDS:
Early April we decided against a position in the underlying and in favour of selling CDS for 6% of NAV. But while CDS has hardly moved since then, we’d apparently have been better off in the bonds. Never mind, we will stay the course.
Happy to discuss,
Wolfgang
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E: wfelix@sarria.co.uk
T: +44 203 744 7003