Ardagh Group’s debt restructuring talks to a group of bondholders has broken down amid a standoff over how much Paul Coulson, the packaging giant’s leading shareholder, will continue to own in its improving drink cans business.
The heavily-indebted business proposed in March that a group of senior unsecured bondholders write off much of the $2.32 billion (€2.05 billion) they are owed in exchange for taking full ownership of the glass containers part of the business.
The plan also envisaged Ardagh Group spinning its shares in its beverage cans unit, Ardagh Metal Packaging (AMP), into a new company (NewCo). This would be 80 per cent owned by Mr Coulson and other existing Ardagh Group shareholders – with the unsecured creditors receiving the remaining 20 per cent.
However, the unsecured creditors issued a proposal on Sunday that would see them take 40 per cent, rather than 20 per cent, of AMP, which has seen is prospects improve in recent quarters even as the glass containers arm of the group continues to grapple with weak demand.
There is also disagreement over the ultimate value of AMP.
“The parties have not reached an agreement and are no longer in discussions,” said Ardagh Group in a statement on Tuesday.
[ Ardagh cans unit ‘turns corner’ amid Coulson bid to keep controlOpens in new window ]
“The company remains committed to putting in place a sustainable capital structure. The company will continue to review its options and may continue discussions with its stakeholders in the future relating to its capital structure and its applicable debt maturities.”
Ardagh Group, which Mr Coulson built into one of the world’s largest packaging companies through a series of debt-fuelled acquisitions over the past 25 years, said more than a year ago that it was considering options to lower its $12.5 billion debt pile. The burden had become increasingly unsustainable in recent years amid weaker-than-expected earnings.
Talks with the senior unsecured creditors would have become more complicated when Ardagh Group said last month that the beverage cans unit had turned a corner”, helped by a rebound in activity across the energy drinks, sparking water and health and wellness categories.
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The group’s 76 per cent-owned AMP unit, which is listed on the New York Stock Exchange, reported its revenues grew by 11 per cent year-on-year in the first quarter to $1.27 billion and upgraded its full-year earnings forecast.
However, Ardagh Group’s legacy glass business saw its revenues drop 6.7 per cent to $961 million during the quarter as this arm of the group continued to struggle.
It is expected that the focus now switch to Ardagh Group’s parallel discussion with senior secured creditors, who currently stand to be made whole under the group’s debt-restructuring proposal. Progress towards an agreement at this level may lead to reengagement between the senior unsecured bondholders.
Meanwhile, holders of some $1.8 billion of risky bonds issued by a holding company above the operating Ardagh Group are expected to lose almost all of what they are owed. These bonds are currently trading at about 4 per cent of their original value, according to Bloomberg data.
Mr Coulson controls Ardagh Group through an 18.8 per cent direct stake in its ultimate parent company and a 52.4 per cent interest in a vehicle called Yeoman Capital, which owns 33.9 per cent of the group. He effectively owns 36.6 per cent of the equity in a business that traces its roots to the Irish Glass Bottle Company, founded in Dublin in 1932.
The group also has a 42 per cent stake in a food cans business, called Trivium Packaging.
