Ardagh Metal Packaging (AMP) has raised its full-year profit outlook for the third time this year, underscoring how the business became entangled in a control struggle as its heavily-indebted parent, Ardagh Group, negotiated a debt restructuring plan with bondholders earlier in the year.
The New York-listed company, in which Ardagh Group owns a 76 per cent stake, said on Thursday that it now expects earnings before interest, tax, depreciation and amortisation (Ebitda) of between $720 million and $735 million (€621 million-€634 million).
The midpoint of the range is 1.7 per cent higher than what AMP was forecasting three months ago, and 6.2 per cent above midpoint of its initial projection, outlined in February.
The improvement has been driven by lower running costs and greater sales of higher-margin drink cans this year, even as AMP has increased its overall sales volume forecast only slightly as the year progressed, to around 3 per cent.
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“We delivered a strong performance in the third quarter,” said AMP chief executive Oliver Graham. “Adjusted Ebit growth in the quarter was supported by shipments growth in Europe and north America, lower operational and overhead costs, as well as favourable category mix.”
The quarter results come as Ardagh Group seeks to finalise a debt restructuring deal struck in July that would see the group’s legacy shareholders, led by Irish businessman Paul Coulson, cede control of the wider glass and drink cans giant to a group of bondholders in exchange for a $300 million pay-off.
Mr Coulson, who effectively owns 36 per cent of the group, had originally sought, as talks got underway in earnest earlier this year, to retain control of AMP, while handing the weaker glass bottles business over to bondholders. However, bondholders pushed back against that proposal.
The company at the top of Ardagh Group corporate tree has an estimated $12.5 billion of debt, the result of a series of debt-fuelled acquisitions over the past 25 years and borrowings taken on to finance shareholder distributions.
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That debt became unsustainable after its earnings were hit since the Covid-19 pandemic by inflation, soaring interest rates, and soft consumer demand on both sides of the Atlantic. The glass bottles part of the business has struggled much more than the metal containers side.
The major debt restructuring will see senior unsecured bondholders and holders of high-risk payment-in-kind (PIK) notes swap $4.2 billion of debt for equity in Ardagh Group. The senior unsecured creditors will end up with 92.5 per cent of the equity in the group, and holders of the PIK Notes will hold 7.5 per cent.
However, the Financial Times reported this week that the deal has hit a stumbling block, with Deutsche Bank and Carronade Capital, who own 13 per cent of the PIK notes between them, seeking to block the deal and improve the terms on offer to this class of junior bondholders.
[ Ardagh talks with creditor group break down over improving cans unitOpens in new window ]
Ardagh Group is seeking a consensual deal that would avoid the matter having to go before the courts. This requires over 90 per cent approval from each category of bondholder participating in the restructuring.
Still, there continues to be the option of the restructuring going through under a so-called scheme of arrangement, where the support threshold would only be 75 per cent. However, this type of deal needs to be rubberstamped by a court.
