Ardagh Group, the glass and metal containers giant, has warned that there could be “substantial doubt” over its ability to continue as a going concern as it continues debt restructuring talks with bondholders.
“The group and its advisors continue to engage with noteholders in a constructive manner, seeking to achieve a long-term sustainable capital structure,” Ardagh, which Irishman Paul Coulson built into one of the world’s largest packaging companies through a series of debt-fuelled acquisitions over the past 25 years, said in its annual report.
“The directors have concluded that the ability to satisfactorily conclude the capital structure review in advance of the upcoming debt maturities, which may include restructuring, renegotiating terms or maturities or otherwise refinancing maturing loans, represents a material uncertainty that could raise substantial doubt on the group’s ability to continue as a going concern.”
However, the group’s directors, led by chairman Herman Troskie, concluded that it was appropriate to prepare the annual financial statements on a going concern basis, meaning it should be able to meet financial obligations for at least a 12-month period.
Ardagh Group had net borrowings of $10.5 billion (€10 billion) the end of December, equating to 7.6 times its earnings before interest, tax, depreciation and amortisation (Ebitda) for 2024. However, the ultimate parent company over the group, ARD Holdings, had $12.5 billion of net debt – or 9.5 times earnings – as of the end of September. ARD Holdings has not yet published its 2024 annual report.
Ardagh Group showed signs of earnings stabilisation in its glass packaging units in the final four months of the year, following a period of weakness. Its metal packaging business, New York-listed Ardagh Metal Packaging, in which it has a 76 per cent stake, recorded double-digit earnings growth.
Ebitda in Ardagh Glass Europe and Africa rose 15 per cent on the year in the fourth quarter, to $86 million, driven by lower energy and other input costs, while North America glass earnings rallied 25 per cent to $25 million as the group pushed up selling prices.
Ardagh’s European metal packaging business posted an 81 per cent jump in Ebitda, to $56 million, while the America unit saw earnings dip 8 per cent to $108 million.
Ardagh’s riskiest bonds were issued by a company, called ARD Finance, which is above Ardagh Group but below the ARD Holdings. ARD Finance’s $1.79 billion of payment-in-kind notes – which rank lower than all other bonds in terms of recovery in the event of a liquidation – are currently trading at between 5.4 cents and 6.7 cents on the euro, according to Bloomberg data. This reflects a widespread believe it the market that holders of these notes will lose almost all of what they are owed in a debt restructuring.
While senior Ardagh bonds that mature next year (and which are secured against Ardagh assets) are trading at more than 90 per cent of their nominal value, $2.33 billion of senior unsecured bonds due in 2027 are changing hands at about 50 cent on the dollar.
