Standard & Poor's (S&P) said on Monday it has lowered its outlook on Ardagh Group's debt ratings, citing the group's "aggressive" financial policy, demonstrated earlier this year as the glass and metal containers maker borrowed $350 million to fund a shareholder windfall.
Lowering its stance on Ardagh’s “B+” credit rating to “stable” from “positive”, S&P said it expects the group’s debt to “remain at or above” seven times earnings before interest, tax, depreciation and amortisation to remain in the near term. The credit rating is four levels below what S&P deems to be investment grade.
The $350 million of so-called payment-in-kind notes were issued in January by Ardagh’s ultimate parent group, with interest on the bonds set to be rolled up and added to the principal of the debt over the five-year lifetime of the securities, rather than investors receiving regular cash payments.
Ardagh, built up over the past two decades through a series of acquisitions by chairman and chief executive Paul Coulson, is the third-largest global manufacturer of metal beverage cans, with leading positions in glass food and beverage packaging and metal food packaging.
“Ardagh focuses on the relatively stable beverage and food end-markets (93 per cent of sales) and operates in relatively consolidated markets,” S&P said, adding that its ratings reflect Ardagh’s “relatively strong profitability, longstanding customer relationships, scale, and efficient cost base”.
“Partially offsetting these strengths is a degree of customer concentration; the capital-intensive nature of Ardagh’s glass operations; and its exposure to volatile raw material, freight, and energy costs, despite the group’s prudent hedging strategy,” it said.
