Sell-side analysts say bonds of Samsonite Corporation (Caa1/CCC+) are an attractive pickup for investors, as they expect a fairly healthy economy and a return to something resembling normalcy in the travel industry within the next year. Arthur Roulac, consumer products sector analyst at Banc of America Securities, says that among the credits he covers, Samsonite has been hit the hardest in the wake of the attacks on the U.S. The luggage maker's 10.75% senior subordinated notes of '08 were bid in the mid- to high-60s last week, having been in the low- to mid-80s throughout August.
Tim O'Neal, analyst at CIBC World Markets, says the bonds are unlikely to fall much further over the next three to six months, and could rally to earlier price levels if travel and the economy rebound. He notes that half of the company's sales, and a significant portion of its profits, come from Europe, where travel does not appear to have been as significantly affected by the attacks.
Roulac estimates a 10-15% decline in Samsonite's sales over the next several months. While he cautious that such an estimate is difficult to make, he notes that Samsonite has ample liquidity to weather the downturn. At the end of the second quarter, it had drawn only $9 million on a $70 million revolver. He also points out that while air-travel may be down, people will continue to travel by train and car, which should serve to buoy sales somewhat. He declines to set a price target for the bonds.