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Ardagh Glass Issues notes to tap into existing issues

Yesterday, Ardagh announced that it will issue USD 160 mn of 7.375% senior secured notes due 2017 and USD 250 mn of senior notes due 2020, the proceeds of which will be used to fund acquisitions (including Boxal), to repay existing debt, or for other general corporate purposes.

Many commentators believe that the reason for the USD offering (as opposed to EUR) reflects the unfavourable financial climate in the Euro region and Ardagh’ decision to be more US-centric, which is validated by its earlier proposal to list in the US, for which it had even filed documentation with the SEC. Further, the company stated that it was in “advanced negotiations” with certain vendors regarding two other acquisitions, which may materialise in the near future.

Given management’s acquisitive strategy, the notes issue is well-timed. In addition, Ardagh is seeking to enter into a new securitization program. This facility could be up to EUR 150 mn and would in time replace existing working capital facilities. Ardagh’s current maturity profile is favourable and in all probability any excess cash would be used to repay part of the near term facilities. On Q4/11 trading, management commented that EBITDA is estimated to be weak. That said, cash flows are expected to be supported by seasonal working capital release and lower capex spend.