Ardagh Glass faces a possible downgrade in its debt rating, in part because of the imminent full deployment of Sean Quinn's new €364 million glass plant in Chester.
Ratings agency Moodys yesterday highlighted "the intensifying competitive environment in UK glass" as one reason for putting Ardagh's ratings "on review for possible downgrade".
Moodys said its review would focus on the outlook for Ardagh's "credit metrics and free cashflow generation".
The agency highlighted overcapacity in the UK glass container industry, which it said is expected to increase further with the full deployment of Quinn Group's new plant in the middle of this year.
This will lead to "pricing and margin pressure", according to Moodys.
The report also noted volatility in the price of raw materials and energy costs, which Moodys argues has already hit margins.
The agency's review will also focus on Ardagh's liquidity position over the short-to-medium term. It will examine "access to alternative sources of liquidity in light of covenant limitations within some of its existing financing arrangements".
Moodys said its decision to look at Ardagh's ratings was spurred by a deterioration in credit metrics and free cashflow generation over the past year. There is "no visibility at this time with respect to when margins and cashflow will recover", the agency said.
Ardagh was spun off from Ardagh plc (now South Wharf) in 2003 and was last year taken over by Caona plc, a special-purpose company controlled by some of Ardagh's largest shareholders, including businessman Paul Coulson.
