Moody's rates new Stena bonds Ba3

Moody's Investors Service said it has assigned a prospective Ba3 rating to the proposed $150 million bond issuance by Stena AB. Stena AB's Ba2 senior implied rating and Ba3 senior unsecured issuer rating have also been confirmed.

The outlook remains stable.

The net proceeds from the proposed offering will be applied toward the refinancing of existing debt, mainly drawings under the group's two revolving credit facilities, which increased in October following the early redemption of the $150 million 8.75% notes due 2007.

Moody's said the Ba2 senior implied rating continues to reflect Stena's relatively high leverage on an on balance sheet and on a lease adjusted basis; the group's exposure to economic downturns and charter rate volatility, in particular in the offshore drilling division where oil price developments have a significant impact on rates; the significant portion of Stena's oil drilling rigs which have a few charter contracts expiring before year-end 2004; the risks involved in Stena's investment and trading activities, albeit limited to the restricted group and the risks associated with the current EC investigation into possible price fixing and anti competitive practices by Stena AB and other competitors.

The ratings, however, recognise the diversification of Stena's operations, including the company's leading positions in the RoRo, tanker and drilling markets; the group's improvement in its ferry division with a return to profitability; Stena's strong brand name and market shares in the ferry business in Scandinavia, the UK and Germany and Moody's expectations of lower capital expenditure going forward, which should return Stena to positive free cash generation over the next two years.

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