Paul Coulson hasn't lost his nose for timing a transaction perfectly – at least from where he's standing.
The Ardagh Group chairman sold $1.715 billion (€1.53bn) of dollar and euro-denominated bonds last week to refinance some higher-cost loans and return €270 million of capital to shareholders at a time when public equity markets remain closed. Coulson owns about 36 per cent of the company.
The €845 million of so-called payment-in-kind toggle notes, which allow Ardagh to defer cash payments if it needs to, sold as part of the deal have since slumped in value to 96.6 cents on the euro, down 3.4 cents from where they were sold.
The remaining $770 million of bonds sold have also slipped, by 1 per cent to 99 cents on the dollar.
Less than 24 hours after the deal was priced, bond markets began to tumble, initially with government bonds, amid rising concern that central bankers from Europe to the US may be running out of ammunition and ideas to stimulate economies.
Walloped
It’s hardly surprising that even riskier parts of the bond market (Ardagh, after all, is rated sub-investment grade by the ratings agencies) were also walloped.
Still, investors who backed a $4.5 billion sale of senior bonds in April to fund the group’s $3.4 billion acquisition of a beverage cans business and retire some expensive debt have, on the whole, been rewarded. Some of the bonds are currently changing hands at 6 per cent above where they were sold.
Meanwhile, a short note posted on Ardagh’s website as it was in the bond market shows that the group expects its revenues for July and August fell by a “high single digit per cent” compared to the same period last year, as the company passed on lower input costs to customers, bad weather hit food harvest and the US beer markets remained “sluggish”.
However, the company estimates that its earnings before interest tax, depreciation and amortisation for the period will be “slightly ahead” of the year-earlier period, as Ardagh focuses relentlessly on cost reduction and scraping out efficiencies.
The ability of Ebitda to hold up should help Coulson deliver on his plan to lower the group’s debt ratio and float the group within the next 12 months.
