Ratings agency says Ardagh loan for takeover is 'high risk'

CREDIT RATINGS agency Moody’s yesterday classed the €1.7 billion borrowed by Ardagh Glass to fund its takeover of Dutch packager Impress Co-operative as high risk.

Moody’s is one of a number of agencies that gauge the ability of companies and organisations to repay their debts, and rates them according to the risks to which it is believed lenders are exposed.

The firm yesterday ranked the euro and dollar bonds issued by Ardagh in October as Ba3 and B3, which imply a high risk of default.

Ardagh announced in October that it is buying Impress, which makes cans for the likes of Del Monte and John West, from private equity fund Doughty Hanson, which also owns broadcaster TV3.

Ardagh makes and sells bottles and other glass products and is one of the biggest players in the market in Europe with sales of over €1.2 billion per year and a staff of 6,500.

The Irish company said in October that it would raise €1.7 billion to fund the deal and pay off a €380 million loan to State-owned Anglo Irish Bank. It subsequently issued bonds in both euro and dollars to raise this sum.

The merger will create a new business known as Ardagh Packaging Group and will have combined sales of €3.1 billion in Europe, the US and Australasia, and debt of €2.6 billion.

Moody’s acknowledged the new entity’s financial strengths in its note yesterday, but said its view was tempered by the risks posed to the group by the high level of debt involved, the problems associated with transforming the two organisations involved, and volatile raw material prices.

Financier Paul Coulson chairs Ardagh and its chief executive is Niall Wall. Four years ago, it sold the Irish Glass Bottle site in Ringsend, Dublin, to a group of investors which included the State-owned Dublin Docklands Development Authority and developer Bernard McNamara for €412 million.

The site’s value has since plummeted by an estimated 90 per cent and the loans raised to pay for the deal are now in the hands of State toxic assets agency, Nama.