Ardagh sells first sterling bond with £400m issue
Global packaging giant Ardagh has completed a £400m bond offer, the proceeds of which will be used to redeem $500m in notes due in 2021.
However, the coupon, or interest rate, on Ardagh's first sterling-denominated bond is higher than had been anticipated by analysts, at 4.75pc.
Davy Stockbrokers had anticipated the range on the new bond would have been between 2.5pc and 3pc.
Ardagh, which floated on the New York Stock Exchange in March and is headed by executive chairman Paul Coulson, said that it is also planning to redeem €405m in secured notes due to mature in 2022.
That redemption will be funded through net proceeds of €299m from its flotation, combined with other available cash resources.
"We have issued 10-year unsecured financing on favourable terms which provides us with attractive sterling hedging," Mr Coulson said.
"We have also increased the strength and flexibility of our capital structure and further reduced risk from future market volatility. We have also reduced our exposure to potential US dollar interest rate rises."
Ardagh has been extremely active over the past few years in redeeming expensive debt in order to replace it with cheaper funding. It has saved tens of millions of euro in annual interest repayments in the process.
Earlier this week, ratings agency Standard & Poor's upgraded the packaging group to B+ from B. It noted that Ardagh has grown rapidly via debt-fuelled acquisitions. Last year, Ardagh completed the transformational purchase of assets from Ball and Rexam.
"While Ardagh's recent IPO has not materially affected the group's high leverage, we believe it could be a prelude to increased financial discipline and a focus on deleveraging from the current high levels," noted the agency.
It added: "The positive outlook reflects our view that there is at least a one-in-three chance of an upgrade in the next year if the company successfully integrates its acquired assets and if the group focuses on deleveraging, with the likelihood of increased leverage diminished."
S&P also revised its assessment of Ardagh's liquidity position to strong from adequate.
"This follows considerable refinancing," it noted, "which has further reduced interest costs and pushed out the group's debt maturity profile, with no new capital requirements envisaged in the short term and no material debt maturities until 2021."
Ardagh operates 109 facilities in 22 countries and has global sales of about €7.7bn.