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BASIC INDUSTRIES: DS Smith (SMDSLN NR/BBB- *+/NR): RV

BASIC INDUSTRIES
  • With uncertainty around the IP merger removed, we revisit SMDSLN valuations.
  • The $IP (Baa2/BBB/NR) curve is mainly long end, small issue sizes and is frankly all over the place. We focus on the wider bonds.
  • $IP trades in line with $CE. €SMDSLN trades 10-30 tight to €CE.
  • On the face of it SMDSLN looks tight here, but with the expected rating upgrade we don’t expect any repricing out to CE levels, we just flag it as a risk here. It’s possible $IP is poorly priced for liquidity reasons.

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