Ardagh Group’s biggest shareholder, Paul Coulson, its chairman and chief financial officer (CFO) have quit the board of a funding company behind the group’s riskiest $1.79 billion (€1.74 billion) bonds, amid expectations that investors in these face massive losses as part of a debt restructuring.
The move follows a rejig, announced late on Tuesday, of the board of Ardagh Group, the operating company over the glass and metal packaging group Mr Coulson has built over the past 25 years. This saw two corporate insolvency and restructuring experts join that board as it weighs ways to reduce what is seen as an unsustainable $12.5 billion debt pile carried by wider group.
Two companies sit above Ardagh Group in a complicated group structure that Mr Coulson’s team devised as he tapped investors in the US junk bond market in recent decades to fund large acquisitions and cash distributions to shareholders.
Immediately above the operating company is ARD Finance, a ring-fenced issuer of the $1.79 billion of so-called payment-in-kind (PIK) bonds. The ultimately group parent is called ARD Holdings. All are registered in Luxembourg.
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The PIK notes fall due in 2027 and are currently trading at between 9.5 cents and 14.5 cents on the dollar, according to Bloomberg data, albeit based on very thin trading of these notes.
“Looking at the valuation of the PIKs, the recovery for holders of these notes is likely to be negligible,” said Helen Rodriguez, a senior debt analyst with research firm CreditSights.
The exits of Mr Coulson, Ardagh chairman Herman Troskie and CFO John Sheehan from ARD Finance “removes any potential conflict of interest between the interests of ARD Finance and the operating company, Ardagh Group, as each class of creditor will fight its own corner” as part of a potential wider debt restructuring, she said.
[ Ardagh enlists restructuring experts to board as it looks to cut €12bn debtOpens in new window ]
The exiting shareholders have been replaced by two new Luxembourg-based directors, Johannes de Zwart and Manuel Baldauff. Mr de Zwart declined to comment when contacted by The Irish Times on Thursday, while Mr Baldauff did not respond to efforts to secure comment.
A spokesman for the Ardagh Group also declined to comment on the background to the board overhauls.
Some bonds issued by Ardagh Group are also changing hands at deep discounts, reflecting concerns about investor recovery. Certain senior unsecured bonds – which stand behind secured creditors in the priority for repayment – are currently trading at between 54 and 58 cents on the dollar.
Ardagh chairman Herman Troskie said as recently as late October that the group was looking at options to reduce the burden of its debt and put a “sustainable capital structure in place”. However, assessing an appropriate debt level has been complicated as the earnings outlook for Ardagh’s glass unit continued to deteriorate during 2024, even as that of the group’s New York-listed beverage cans business improved.
The debt of the listed cans business, Ardagh Metal Packaging, is ring-fenced from the parent group.
The net debt level of the company at the top of Ardagh’s complicated corporate tree – ARD Holdings – rose to 9.5 times earnings before interest, tax, depreciation and amortisation (ebitda) in September from a ratio of 8.7 a year earlier. That is viewed by debt ratings agency, including Fitch, to be unsustainable.
Moody’s, another ratings firm, downgraded its rating on Ardagh’s creditworthiness by one level in November to Caa2 – which is eight rungs deep into what is known as “junk” status – saying the probability of default had increased, as about $2.6 billion of its bonds – issued by the operating company – mature in August 2026 in a higher interest-rate environment.
Mr Coulson owns about 36 per cent of parent company, which traces its roots back to the now long-defunct Irish Glass Bottle Company. He stepped down as executive chairman of Ardagh Group in late 2023 but remained a director.
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