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Stagecoach raises £400 million in bond issue

Transport operator Stagecoach has confirmed that a £400 million bond issue offering a coupon of 5.75% was oversubscribed this week. This is the company's first entry into the bond market for over a decade and the fact that the issue was 3 1/2 times oversubscribed is something worth noting. The fundraising was arranged by Barclays Capital, HSBC and Lloyds TSB Corporate Markets and is a seven-year bond issue.

While this particular fundraising had not been flagged prior to the confirmation this week, there has been speculation for some time that the likes of Stagecoach and National Express will need to replenish and rebuild their balance sheets. While Stagecoach is in a far better situation than National Express, which had debts of over £1 billion, both have been hit from a downturn in trading and the general economic downturn in the UK.

The £400 million raised will give Stagecoach more breathing space although with debts of just £340 million there are no problems regarding banking covenants or debt repayments. There is also a suspicion that the company may well be looking to expand in due course, with National Express often mentioned as a potential merger partner, although again there has been no specific comment on this particular issue.

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