Monday 10 December 2018

Ardagh eyes future share spin-out for investors

Ardagh chairman and chief executive Paul Coulson. Photo: Jason Clarke
Ardagh chairman and chief executive Paul Coulson. Photo: Jason Clarke
John Mulligan

John Mulligan

Ardagh, the glass and metal packaging giant headed by billionaire Paul Coulson, might give long-term shareholders in the group's holding company an option to take equity in its stock-market-listed entity over the next two years.

Such an event would also see the free float of the company's shares on the New York Stock Exchange increase, improving liquidity.

Mr Coulson - nicknamed 'The Cooler' - owns about 36pc of Ardagh along with his family. That stake is worth about €1.4bn based on the $4.8bn (€4bn) market capitalisation of Ardagh in New York. Ardagh has its roots in Irish Glass.

The company - one of the world's biggest packaging groups for consumer goods from beer to beauty products - floated in New York last year. But just 8pc of the business was sold to investors.

Mr Coulson built Ardagh into a major global player by adding a massive debt pile to the group. The net debt of the listed entity at the end of last September was €6.7bn. That compared to €7.2bn a year earlier. There's about $2.1bn of additional debt at what is essentially the holding-company level.

Last week, ARD Securities Finance - a new subsidiary of Ardagh Holdings, which is headquartered in Luxembourg - raised $350m of debt through an offering of unsecured PIK (payment-in-kind notes) that will fall due in 2023.

"The net proceeds from this offering, estimated at $344m, will be used by ARD Holdings to provide liquidity to its shareholders," it said.

That's set to see Mr Coulson receive about $100m in proceeds.

The PIK issuance did not affect the leverage of the Ardagh operating group, however.

The new PIK issued by ARD Securities Finance has been dubbed a 'Super PIK' by investors.

They have described it as a riskier debt type than more traditional PIK toggle notes.

They pay interest to investors in cash and can 'toggle' or convert to a payment-in-kind.

PIK notes pay interest with more debt instead of cash, raising the stakes for both borrowers and lenders.

Despite this, the PIK issued by ARD Securities Finance last week drew huge investor interest.

There was $2.5bn worth of orders for the notes, which settled at an 8.75pc coupon rather than the 10pc that was originally envisaged.

Papers seen by banking publication Reuters IFR, show that by 2019 or 2020, the stock market-listed entity may be in position to increase its leverage and possibly look to make a substantial distribution to shareholders.

The Ardagh holding company could then materially reduce the bulk of its debt.

That would leave Ardagh holding company shareholders in a position where a sizeable chunk of shares in the listed, operating company, could be spun out to them.

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