Standard & Poor's Puts Stena Line On Credit Watch

Standard & Poor's placed its single-'B'-plus long-term corporate credit ratings, and its single-'B' senior unsecured debt ratings on Stena Line AB on CreditWatch with negative implications. The CreditWatch placement follows the company's announcement of weaker-than-expected earnings for the first nine months of the year, and the announcement that Stena Line has acquired Scandlines AB (a ferry company operating five routes linking Sweden, Denmark, and Germany) for $67 million in cash. Stena Line, one of the world's largest ferry companies, operates 25 vessels on 12 routes in Northern and Western Europe. It also owns a 40 percent interest in P&O Stena Line. Despite Stena Line's attractive route network, position as market leader on most routes, strong brand name, and modern fleet, difficult market conditions have placed significant financial and operational strain on the company over the past few years. This year's performance has been weaker than expected because of, among other things, higher-than-expected costs. For the first three quarters of 1999, Stena Line reported a net loss of $4.4 million. Stena Line is highly leveraged, with net debt to capital of about 80 percent after the acquisition of Scandlines (adjusted to capitalize operating leases). To resolve the CreditWatch placement, Standard & Poor's will meet with Stena Line's management to discuss the company's recent performance and the plans to address its weak financial profile.