Ardagh Group, run by business tycoon Paul Coulson, has successfully obtained at least $1.04 billion (€980 million) in loans from Apollo, a US alternative asset management company. The funding is to repay bonds which are due next year and to buy back some of its high-risk debt at a price lower than its initial value.
The new loans are believed to come with an interest rate less than 9 percent, considerably higher than the rates of the bonds being paid off. This difference underscores the soaring global borrowing costs in recent years and Ardagh’s less favourable credit rating among top credit rating agencies. These new loans will mature in 2029.
The new funding consists mainly of a $790 million senior secured term loan from Apollo. This loan will serve to cover the cost of $700 million worth of senior notes at face value, due for repayment in the next year. The senior notes carry an interest rate or coupon of 5.25 percent.
Ardagh, ranking among the world’s biggest producers of glass and metal containers, has clinched a deal with Apollo that will see the latter acquire some of Ardagh’s high-risk bonds in the market at a notably lower price to their face value. Apollo, will give Ardagh a premium on top of the market price it pays for the latter’s notes expiring in 2027. However, this facility has been limited to $250 million.
Furthermore, Apollo will supply an undisclosed amount of additional new loans to fund a debt service account at an Ardagh subsidiary. All these new loans are protected by a holding company that owns 76% of Ardagh Metal Packaging, a beverage cans group listed on the New York stock exchange.
Ardagh engaging with a debt specialist in such a deal is out of the ordinary for the company, considering it has been among the most active Irish-led entities in the US junk-bond market over the last two decades. Nonetheless, this move gives Ardagh a window to manage its substantial debt of $12 billion (€11.2 billion).
This month, standard and Poor’s degraded Ardagh’s debt rating to B-, placing it six levels deep in the “junk” status and 15 positions below its peak AAA rating. They indicated a “negative outlook” attributable to the danger that the company’s capital structure could become unsustainable if it continues to deplete cash, struggles to refinance its elevated debt pile or explores restructuring options like a distressed debt exchange.
In response, Ardagh stated this Monday that it is persistently contemplating options with its capital structure, and in conjunction with its affiliates, might aim to further diminish its debt through various means such as discounted open market purchases, exchange offers, tender offers, private negotiated deals or others.
Over the past quarter-century, Ardagh’s ownership, which is traditionally linked to the now defunct glass bottle factory in Dublin’s Ringsend, has been developed by Mr Coulson into one of the world’s topmost producers of glass and metal containers, achieved through a sequence of debt-ridden acquisitions. Mr Coulson relinquished his title as executive chairman in the previous year, but still holds a place on the board and an effective ownership of 36 percent in the group, which is based in Luxembourg.
The group authenticated it is receiving counsel from the US-based investment bank Houlihan Lokey as well as the law firm Kirkland & Ellis in relation to its debt stack.
A slowdown in consumer confidence and reduced orders from food and drink businesses aiming to deplete packaging inventories resulted in a 25 percent decline in Ardagh’s adjusted earnings (ebitda) year-on-year in the final quarter of the previous year, plummeting to $243 million. Over the recent years, the company has made substantial investments, mostly aimed at increasing its can production capability.