Ardagh on track to complete US IPO in 2015
The bond credit rating business released an Issuer Comment this month stating ‘Ardagh's Sale of Six Former Anchor Glass Plants Is Credit Positive’ and gave the company a B3 stable speculative grade credit rating.
40% of US glass container market
Martin Chamberlain, lead analyst for Ardagh, at Moody’s, told FoodProductionDaily, following the acquisition of VNA and the divestment of the Anchor Glass plants, the firm’s North America glass division will generate annual revenues of approximately $2bn from 16 glass manufacturing facilities.
He said the company has a strong position in the US, which is what it was trying to achieve and has approximately 40% of the US glass container manufacturing market.
“Strategically, the combination of the debt refinancing, the disposal of the six Anchor Glass plants and the acquisition of VNA enhances Ardagh’s ability to complete a planned initial public offering (IPO) in the US in the second half of 2015,” he said.
“Because it is unclear when Ardagh would price the IPO, how much it would raise and how the company would use the proceeds, we have not yet factored any positive benefits from the IPO into our rating assessment.”
Ardagh Packaging Group announced it had completed its disposal of six former Anchor Glass plants in the US to Glass Container, an affiliate of KPS Capital Partners in April this year.
The disposal is credit positive for Ardagh because together with related payments and other adjustments it will generate total proceeds of around $490m, which, after costs, the company will apply to the prepayment of debt as part of a partial debt refinancing totalling $3.1bn.
Refinancing total gross debt
The refinancing and reduction of total gross debt will reduce leverage and the group’s interest expenses.
The debt repayment, in combination with pro forma synergies from the acquisition of Veralia North America (VNA) from Compagnie de Saint-Gobain SA (Baa2 stable), will result in a 0.3x decrease in reported gross leverage to 6.5x from 6.8x and lower Moody’s forecasted leverage to 7.0x from 7.4x for 2014.
“We are now looking to see how the integration of VNA goes into the whole Ardagh Group, how it beds down and achieves the cost savings it said it would achieve through the acquisition,” added Chamberlain.
“By acquiring VNA and its growth in the market and customer base, Ardagh is selling to major customers in the region. It will depend on the market if it moves to achieve IPO.”
The debt refinancing extends the company’s debt maturity profile with the earliest repayment now occurring in 2019, versus 2017.
The lower coupon resulting from the refinancing will save the company around €50m per year in interest costs, which is in addition to the reduction in interest from applying the Anchor disposal proceeds, which equals approximately €25m annually.
After taking early repayment penalties into account, the payback period for the company will be close to 1.3 years.
