Ardagh’s debt nears $11.2bn amid S&P warning on risks

Packaging group’s riskiest bonds are currently trading at as low as 27 cents on the dollar

The parent company of businessman Paul Coulson’s Ardagh Group saw its total borrowings near $12 billion (€11.2 billion) last year, according to its latest annual report, published after a leading debt ratings agency warned its balance sheet may become “unsustainable” if it continues to burn cash.

ARD Finance, which lies at the top of the glass and metal containers group’s corporate tree, revealed that its gross borrowings had risen from $11.6 billion a year earlier.

Its net debt rose almost 9 per cent to $11.3 billion, leaving it at 8.7 times earnings before interest, tax, depreciation and amortisation (ebitda), up from a ratio of 8.2 at the end of 2022.

The group’s riskiest bonds, almost $1.8 billion of so-called toggle notes, which allow the company to defer interest payments if it needs to, are currently trading at between 27 cents and 31 cents on the dollar.


They are due to be repaid in 2027 but have fallen in value from about 80c on the dollar last autumn, reflecting concerns about the effect about the group’s rising debt burden, following a drop in earnings.

Still, higher-ranking debt that matures over the next two years is currently trading between 85c and 96c.

S&P downgraded Ardagh’s debt rating late last week to B-, which is six rungs deep into ‘junk’ status and 15 levels below its top-notch AAA rating, saying its “negative outlook reflects the risk the capital structure could become unsustainable if the group continues to burn cash, struggles to refinance its very high debt stock, or considers restructuring options such as a distressed debt exchange”. A spokesman declined to comment on the report.

Bloomberg reported last month that Ardagh Group has hired US law firm Kirkland & Ellis and investment bank Houlihan Lokey to advise on options regarding its debt pile. Meanwhile, financial firms Gibson Dunne & Crutcher and Milbank have been retained by certain creditor groups.

Ardagh, which traces its roots to the long-since closed glass bottle factory in Dublin’s Ringsend, has been turned by Mr Coulson over the past 25 years into one of the world’s largest glass and metal container makers, through a series of debt-fuelled acquisitions.

Ardagh executives told bondholders in February, as the group unveiled a weak set of fourth-quarter results, that it was “very conscious” of debt maturities and had been reviewing its capital structure. They declined to comment on potential levers that could be pulled to ease its debt burden, though they noted the company has about $800 million of cash and that that financial market conditions have improved this year, amid expectations of central bank rate cuts.

Ardagh’s adjusted ebitda slid by 25 per cent on the year to $243 million in the fourth quarter last year, amid subdued consumer confidence and as drinks and food companies cut back orders to run down packaging stockpiles. The company had invested heavily in recent years, mainly to expand its can production capacity.

Mr Coulson stepped down as executive chairman late last year, but remains on the board and holds an effective 36 per cent stake in the group.

Ardagh and the Ontario Teachers’ Pension Plan Board were reported in January to be exploring for the second time in two years putting their food and speciality metal cans joint venture, Trivium, on the market, in a transaction that could put an enterprise value of more than $3.5 billion on the business, including debt.

Ardagh floated its beverage cans business, Ardagh Metal Packaging (AMP) in 2021. It retains a 76 per cent stake.

“We expect the group to continue generating negative adjusted FOCF [free operating cash flow] in 2024 and 2025 and view its debt burden as very high, with the refinancing of its upcoming debt maturities – in April 2025 and August 2026 – relying materially on positive market sentiment,” S&P said.

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