Moody's reaffirms its stance on Ardagh's €275m bond
Published 02/02/2011 | 05:00
RATINGS agency Moody's has reaffirmed its B3 stance on a €275m unsecured bond issued by Irish glass container maker Ardagh after the company said it has increased the issuance to €475m.
Ardagh said the money will be used to both finance bolt-on acquisitions and for general corporate purposes.
Moody's added that its B2 family corporate rating for Ardagh, with a positive outlook, also remains unchanged.
The agency said it will be monitoring whether Ardagh management are now looking at continued expansion of the group as opposed to focusing on net debt reductions.
Moody's said that any larger debt-financed acquisition which would delay the expected improvement in credit metrics might have an impact on the group's rating and its outlook. The €475m bond matures in 2020 and was being sold with a 9.25pc coupon. The additional €200m portion of that issued yesterday was heavily oversubscribed and sold by the day's end. The high level of interest pushed the yield down to just over 8.2pc, making the issuance cheaper for Ardagh.
In December, Ardagh, which is controlled by Dublin financier Paul Coulson, completed the €1.7bn acquisition of the Impress group. The enlarged Ardagh group has annual revenues of about €3bn and has net debt of about €2.5bn.
In 2009, Ardagh's revenues fell 9pc to €1.23bn. Excluding foreign exchange effects, the figure was 3.4pc lower. In
2008 it recorded an operating profit of just under €90m before other expense charges were incurred. After shouldering €48.1m in additional expenses, including €44m in redundancy costs, its operating loss was €59.7m.
When other finance costs totalling €95.8m were factored in, Ardagh's final loss for 2009 was €74m. In 2008, it posted a €13.4m loss.
Moody's pointed out that Ardagh's B2 corporate family rating reflects the company's increased scale and improving geographic spread.
"The positive outlook also incorporates Moody's expectation that the enlarged group will continue to tightly manage production volumes and prudently control volatile input costs without compromising current profitability levels as well as the preservation of an adequate liquidity profile including sufficient leeway under financial covenants," the ratings agency explained, pointing out that the ratings could be upgraded over the next 12 to 18 months if Ardagh manages to deleverage further.