Ardagh Group has appointed corporate insolvency and restructuring experts from both sides of the Atlantic to its board as the glass and metal packaging group continues to weigh options to reduce what is seen as an unsustainable $12.5 billion (€12.1 billion) debt pile.
The company, which Irishman Paul Coulson built into one of the world’s largest packaging companies through a series of debt-fueled acquisitions over the past 25 years, has appointed Paul Copley, a former partner in PwC’s UK insolvency and recovery practice who went on to lead the wind-up of a failed Iceland bank, as a non-executive director.
Ardagh has also brought in New York-based Jame Donath, who, it noted, has “extensive experience serving in non-executive director roles for pre- and post-reorganisation companies”.
The appointments come as four directors - Abigail Blunt, former UK chancellor Philip Hammond, Oliver Graham and Yves Elsen – resign from its board. However, each remains a director of the group’s New York-listed beverage cans business, Ardagh Metal Packaging (AMP).
Ardagh chairman Herman Troskie said as recently as late October that the group was looking at options to reduce the burden of its debt and put a “sustainable capital structure in place”. However, assessing an appropriate debt level has been complicated as the earnings outlook for Ardagh’s glass unit continued to deteriorate during 2024, even as the AMP unit improved.
Ardagh’s riskiest bonds traded below 20 cent on the euro during 2024 as investors became increasingly concerned about the group’s debt.
The discount at which its most-junior – or subordinated – bonds have been trading indicates that holders of these notes, which fall due in 2027, expect they will have to write off much of what they are owed as part of restructuring. Mr Coulson owns about 36 per cent of the business, which traces its roots back to the now long-defunct Irish Glass Bottle Company.
The net debt level of the company at the top of Ardagh’s complicated corporate tree – ARD Holdings – rose to 9.5 times earnings before interest, tax, depreciation and amortisation (Ebitda) in September from a ratio of 8.7 a year earlier. That is viewed by debt ratings agency, including Fitch, to be unsustainable.
Moody’s, another ratings firm, downgraded its rating on Ardagh’s creditworthiness by one level in November to Caa2 – which is eight rungs deep into what is known as “junk” status – saying the probability of default had increased, as about $2.6 billion of its bonds mature in August 2026 in a higher interest-rate environment.
Moody’s retained a negative outlook on its ratings, highlighting that Ardagh may engage in a so-called distressed debt exchange to lower its borrowings. This could involve the company swapping some of its existing bonds with notes that have a lower value – effectively forcing losses on bondholders.
Another lever would be to sell assets. The group and the Ontario Teachers’ Pension Plan Board put their food and speciality metal packaging joint venture, Trivium Packaging, on the market last year. US private equity firm Platinum Equity was reported in September to be in talks to buy the business, in which Ardagh has a 42 per cent stake, for about $3.5 billion.
However, after taking Trivium’s own debt level into consideration, a sale at that valuation would see Ardagh receive less than $300 million for its equity interest.
Mr Troskie last year ruled out Ardagh selling down its 76 per cent stake in New York-listed AMP as it traded at a discount to its intrinsic value. The stock is currently trading at $2.75 – well below the $4 target that analysts at Citigroup put on it this week.
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