AERM

The piece is only relevant to Stena publicly traded bonds, which offer indeed interesting yield, as the company is privately help. Increasing leverage due to Capex lately, but well diversified income stream from different sector to support a more balance cash flow in the future.

Stena remains an under-appreciated and under-analyzed credit. It is among the 20 largest high-yield issuers in the Nordics, and on a balance-sheet basis it would rank among the top 12 industrial companies on the Stockholm Stock Exchange – had it been listed. Few companies offer comparable diversification. Within Stena you effectively get a portfolio comprising Europe’s largest ferry operator, one of the world’s largest offshore drilling contractors, one of the largest tanker operators globally, and one of Sweden’s major real estate developers. Added to this is a sizeable leasing business and Adactum, an investment arm holding nine companies with combined assets exceeding SEK 14bn and annual revenues of SEK 20bn. This breadth provides meaningful value to creditors by creating a cash flow base that is highly diversified and resilient. That resilience has increased over the past decade as Stena has deliberately shifted its portfolio toward businesses with more stable earnings. Despite this scale, diversification, and improvement in cash-flow quality, Stena’s bonds still trade in single-B territory. In our view, the group’s size, asset base, and improving leverage trajectory point to a higher-quality credit profile, and therefore we continue to see the bonds as attractive.

• Cyclical headwinds have weighed on Stena’s performance this year. Reduced contracted activity in the offshore drilling segment lowered LTM EBITDA – from SEK 12.9bn last year to SEK 11.6bn as of 3Q25, excluding non-recurring items such as gains or losses on asset sales and property revaluations. Combined with more than SEK 8bn of capex year-to-date, this has pushed leverage from 5.4x at the start of the year to 5.8x in 3Q25. We expect leverage to rise slightly above 6x as we enter 2026, but we also believe that next year will mark the start of a gradual improvement. This view is supported by two developments. First, the drilling backlog appears to be strengthening: only 68% of available rig days were contracted this year, but when including options, close to 80% of days are covered for next year, giving better earnings visibility. Second, capex commitments are set to decline sharply. After investments peaking at SEK 14bn in 2024, remaining newbuild commitments amount to only SEK 3.0bn, of which just SEK 0.6bn falls due in 2026. With materially lower capex, we expect Stena to generate positive free cash flow, and therefore see leverage falling from above 6x at year-end 2025 to below 5x by year-end 2026.

• Over the past few years Stena has executed an exceptionally large investment program. Average annual capex exceeded SEK 10bn from 2022 through 2024, and we expect a similar level – close to SEK 10bn – in 2025. These amounts are more than three times what is required to maintain the company’s asset base across vessels, rigs, and properties. As a result, the forward-looking capex requirement is materially lower, particularly as the fleet and property portfolio now largely consist of long-lived assets capable of generating cash flow for the next 20–30 years. For bondholders, the key point is that the company’s cash-flow base is highly resilient through downturns.

Our stress tests indicate that Stena could, through 2030, withstand a scenario where its two most cyclical segments – offshore drilling and tankers – contribute nothing to EBITDA. This resilience reflects the deliberate portfolio shift over the past decade toward businesses with more stable earnings such as ferries, long-term RoRo charters, and residential real estate. Asset coverage is also strong.
The residential property portfolio is leveraged below 50%, and on a consolidated basis we see group-level leverage in the same range, providing substantial balance-sheet support for creditors.

• Stena AB, one of Sweden’s largest privately held groups, operates a highly diversified portfolio spanning ferry transport, offshore drilling, shipping, real
estate, and investments. Its New Businesses division, Stena Adactum, adds further breadth through a portfolio of companies generating SEK 20bn in annual
revenue and holding assets of SEK 14bn. Stena Line, the ferry arm, operates 31 vessels across 19 European routes. The shipping division includes 13
RoRo/RoPax vessels and a tanker fleet of roughly 60 vessels, while Stena Drilling manages six floating rigs. In real estate, Stena Property ranks among the
largest private owners in Sweden, with more than 28,000 residential units and around 2,000 commercial properties.

• Wholly owned by the Olsson family, Stena AB forms part of the broader Stena Sphere – together with Stena Metall and Stena Sessan – which collectively
employs more than 22,000 people and generates close to SEK 100bn in annual revenue.