A group of disgruntled holders of Ardagh Group’s riskiest bonds have lost a legal challenge to a multibillion-euro debt restructuring that will almost wipe them out, even as lower-priority equity holders led by businessman Paul Coulson enjoyed a $300 million (€257 million) pay-off.
A holding company within the Luxembourg-based group said in a statement on Thursday that a district court in the grand duchy has confirmed the reorganisation plan that was essentially completed last November – save for dealing with the group of resistant bondholders.
While almost all unsecured senior bondholders agreed late last year to convert their $2.39 billion of bonds into a 92.5 per cent stake, only 86 per cent of holders of so-called payment-in-kind (PIK) notes, the riskiest bonds, signed up to converting their $1.98 billion of credit into a 7.5 per cent stake. That was below the 90 per cent threshold needed to impose the deal on all members of this bondholder class without the group having to resort to a court-overseen process.
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A group of dissenting PIK holders – led by units of Deutsche Bank and Carronade Capital Management – subsequently challenged the plan as Ardagh moved to enforce it through court proceedings in Luxembourg and the US. Their initial bid to have their case heard in New York was rejected in March by a bankruptcy court in the city, which recognised the Luxembourg court as the main authority over the restructuring plan.
RM Block
The dissident PIK holders claimed in the Luxembourg proceedings that the $300 million payment given to Coulson and other shareholders – who were lower in the pecking order to the PIK holders in the group’s capital structure – was really owed to them.
Coulson received $108 million for the 36 per cent indirect stake he held before the restructuring. However, the stake was worth as much as $2.4 billion in 2021 when Ardagh Group was listed in New York.
Ardagh said on Thursday, however, that the Luxembourg court last week officially confirmed the judicial reorganisation plan. The ruling means the holdout PIK holders will see their almost $280 million of notes converted by force into about a 1 per cent stake in the business. The decision is open to appeal.
The court confirmation follows signs of improvement in the trading performance in recent quarters in the business of Ardagh Group, which has annual sales of about $9.6 billion.
Ardagh Group reported in April that its earnings before interest, tax, depreciation and amortisation (ebitda) grew to $322 million in the first quarter, up from $290 million for the same period last year. Revenue rose almost 12 per cent to $2.49 billion – even as sales volumes declined.
The sales and earnings pickup has been driven by the New York-listed metals packaging division, in which it owns a 76 per cent stake. However, the more problematic glass bottles business has also shown signs of stabilising in the past few quarters.
Ardagh Group traces its roots to the long-defunct Irish Glass Bottle Company in Dublin. Coulson took control of the business in the late 1990s and transformed it into a global packaging group through a series of acquisitions fuelled by debt raised in so-called junk-bond markets. The group’s net debt stood at $8.96 billion at the end of June.
