Ardagh Group is expected to resort to the courts to force holders of its riskiest €1.8 billion of bonds to forfeit most of what they are owed, after it failed to secure enough support from this group of creditors to get a major debt restructuring deal over the line.
The international glass and metal containers group built by Irish businessman Paul Coulson confirmed on Tuesday that it has received sufficient backing from senior secured and unsecured bondholders for a deal that would reduce its $12.5 billion (€10.7 billion) net debt.
More than 99 per cent of holders of both senior creditor categories have consented to a restructuring that would see unsecured bondholders and holders of high risk payment-in-kind (PIK) notes swap $4.2 billion of debt for equity in Ardagh Group for ownership of the 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. Mr Coulson and other legacy shareholders have agreed to accept $300 million to walk away.
More than 99 per cent of bondholders in the senior secured and unsecured categories have signed up to the deal, Ardagh Group said. That’s well above the 90 per cent threshold needed for a consensual deal to go through.
However, only 82 per cent of holders of €1.8 billion of the group’s riskiest PIK bonds have consented. Ardagh Group said it will now seek to implement a restructuring of this group by an “alternative implementation”.
While a spokesman for the packaging group declined to comment on what that entails, Ardagh Group has previously stated that it could resort to a so-called “scheme of arrangement”, where the support threshold is only 75 per cent. This type of deal needs to be rubber-stamped by a court.
It has also been reported that Ardagh Group is considering, as an alternative, filing for a judicial reorganisation procedure in Luxembourg, where the group’s main companies are based.
Mr Coulson, who is supportive of the restructuring, owns more than €30 million of the PIK notes, which were trading at three to five cent on the euro before the debt overhaul deal was announced in July, after months of tough negotiations.
However, the Financial Times reported last week that Deutsche Bank and Carronade Capital, which own 13 per cent of the PIK notes between them, were seeking to block the deal and improve the terms on offer to this class of junior bondholders.
Mr Coulson, who effectively owns 36 per cent of the group, had originally sought to retain control of its prized drink cans unit, Ardagh Metal Packaging (AMP) as talks got under way in earnest earlier this year, while handing the weaker glass bottles business over to bondholders. However, bondholders rejected that proposal.
The company at the top of Ardagh Group corporate tree has an estimated $12.5 billion of net debt, the result of a series of debt-fuelled acquisitions over the past 25 years and borrowings taken on to finance shareholder distributions.
That debt became unsustainable after its earnings were hit after 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.