The majority company of the Ardagh Group, overseen by entrepreneur Paul Coulson, saw its total lending rise close to $12 billion (£8.92 billion) in the previous year, according to the most recent yearly report. This was published following the warning by a top debt credit agency that, if the firm keeps overspending, its financial stability could be at risk. ARD Finance, the highest entity of the glass and metal container corporation, disclosed that its total lending had increased from $11.6 billion the year prior.
The firm’s net lending surged almost 9%, culminating at $11.3 billion. This equates to 8.7 times its earnings preceding interest, tax, amortisation, and depreciation (EBITDA), which suggests an increase from a ratio of 8.2 at the end of 2022.
The firm’s riskiest bonds, known as toggle notes, stand at around $1.8 billion. The company has the provision to postpone interest payments if necessary. These are said to be repaid in 2027, however, their value has dropped significantly due to rising concerns regarding the corporation’s increasing liability and reduced income.
Nevertheless, high-priority debt due for payment in the following two years is currently priced between 85c and 96c. S&P downgraded Ardagh’s credit rating recently to B-, six grades into ‘junk’ status, and 15 below its top AAA grade. This was due to the risk that, if the corporation continues to overspend, it could potentially find it challenging to refinance its high debt, potentially leading to a financial restructuring.
Last month, Bloomberg reported that Ardagh Group has enlisted US law firm Kirkland & Ellis, along with investment bank Houlihan Lokey, to guide on options for its debt accumulation. Additionally, Gibson Dunne & Crutcher and Milbank, financial firms, have been retained by specific creditor groups.
Ardagh, which originated from a now defunct glass bottle factory in Dublin’s Ringsend, has been transformed by Mr Coulson over the past quarter-century into a global leader in glass and metal container production, facilitated by a string of debt-incurred takeovers.
Revising its capital structure was announced by Ardagh executives in light of its underwhelming results from the last quarter of the previous year. They mentioned that the company’s cash reserves were approximately $800 million and financial market conditions had improved over the year with expected central bank rate reductions. However, their silence on the potential adjustments aimed at lessening its debt remained.
In the previous year’s final quarter, Ardagh’s EBITDA had dropped by 25 per cent to $243 million. The downturn was due to diminished customer assurance and food and beverage companies reducing orders to deplete their packaging inventory. The company had largely invested in the advancement of its can production capacity over recent years.
In the previous year, Mr Coulson, the then Executive Chairman, stepped back but continues to be a board member and maintains his ownership of 36 per cent shares in the group.
Reports in January suggested that the Ontario Teachers’ Pension Plan Board and Ardagh were contemplating putting their joint venture, Trivium – a speciality metal and food cans company, on sale for the second time in two years. The estimated value of the venture, including its debt, is claimed to be over $3.5 billion.
In 2021, Ardagh took its beverage cans sector, Ardagh Metal Packaging (AMP), public, keeping its majority stake of 76 per cent.
According to S&P, it’s anticipated that Ardagh will continue to have a negative adjusted Free Operating Cash Flow (FOCF) for 2024 and 2025 and its debt load is seen as quite significant. The company’s strategy of refinancing its forthcoming debt maturities in April 2025 and August 2026 is heavily dependent on favourable market sentiment.