Ardagh - comment
Ardagh Group shareholders are taking a gamble and using the shareholding value in Ardagh Metal Packaging (AMPBEV) as collateral for a loan from Apollo at the intermediate holdco outside either restricted group to repay the $700m April 2025 SSNs. We still think the Glass business is over-levered and needs to restructure its debt. The Apollo loan will buy Ardagh Group time but at a cost. The ARDFIN PIK Toggle holders will no longer receive cash coupons after June 24 and now have a lower chance of ever seeing AMPBEV proceeds. Ardagh’s shareholders give up the ability to dividend the value of AMPBEV to the parent company but retain an option on the glass business. This deal surprised us, but maybe the fear of a fraudulent conveyance challenge stymied any plans to extract the value of AMBBEV via a dividend or share distribution. Apollo either gets repaid or will gain control of AMPBEV by enforcing its security. AMPBEV is initially unaffected by the transaction, but there is a high possibility that it will experience a change of control event if Ardagh Group cannot refinance its 2026 SSNs and Apollo enforces its security. We are positioned for that. Nonetheless, we remain sceptical that Ardagh will be able to refinance its $2.5bn SSNs maturing in 2026.
The holding company for the AMPBEV investment (AIHS) will borrow up to $1.04bn from Apollo. $755m of a $790m term loan 1 will be loaned to Ardagh Group to redeem the $700m April 2025 notes; that loan will then be repaid through new SSNs issued by Ardagh Group due in 2029. We expect that the additional $55m is one year’s interest on the new SSNs, implying a coupon of around 8%. A further $250m (TL 2) will be available for AIHS to purchase SSNs or PIK Toggle notes (issued by ARD Finance) from Apollo at a pre-agreed premium. There is a third element of the Apollo loan to cover interest (no size given).
The LTV of the Apollo Term Loans is 58%. This calculation includes both the equity value and the Preference Equity. There is no indication in the release that there are any covenants related to the LTV.