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Irish entrepreneur Paul Coulson has told Ardagh bondholders that its shareholders need a payment of at least $300mn to walk away from the debt-laden packaging giant he built through decades of acquisitions.
Ardagh Group, which is based in Luxembourg and produces glass bottles and metal cans in facilities spanning Europe, America and Africa, has been at the centre of contentious restructuring negotiations about more than $10bn of debt built up in the era of cheap money and low interest rates.
After Ardagh announced in May that talks had broken down about a restructuring in which Coulson — the group’s former chair who has voting control of its shares — would retain a stake, discussions have shifted to whether the Irish entrepreneur and other shareholders would hand over the whole company in exchange for a one-off payment.
Coulson has insisted that Ardagh shareholders need $300mn in order to consider walking away, according to people familiar with the discussions, with other strict conditions around securing the money swiftly.
While bondholders earlier offered $250mn to these shareholders, the Irish businessman has already rejected their proposal, according to the people familiar with the matter. Coulson has relayed that the group’s shareholders will not accept anything less than $300mn, they added.
A tough negotiator with a flair for financial engineering, Coulson’s previously lucrative investment in Ardagh rose from the ashes of a troubled airline leasing business in the 1990s.
After winning a multimillion payout from a legal settlement with the investment bank that advised him on a disastrous takeover deal by the aviation finance firm, Coulson ploughed the windfall into a stake in Ardagh, which was then a small Dublin-based bottling company.
Through a series of debt-fuelled acquisitions, the businessman transformed Ardagh from a regional Irish bottler into one of the world’s biggest producers of both glass and metal drinks containers. In the process, Coulson became a billionaire because of the value of his stake, making him one of the richest people in Ireland, where he has long been nicknamed “the Cooler” for his steely demeanour.
Ardagh for decades has been a frequent issuer of junk bonds, serving as a bellwether of the market for riskier debt in Europe. During the height of low interest rates and quantitative easing, Ardagh’s parent companies pushed the envelope in issuing risky payment-in-kind bonds that can pay bondholders interest in the form of more debt.
Coulson has in the past profited from buying up Ardagh’s riskier bonds at a discount during periods of market volatility, riding out jitters around the sustainability of the group’s debt with his stake in the business intact.
But, in recent years, Ardagh has been hit by interest rate rises, surging costs at its energy-intensive plants and a slowdown in demand at the large drinks manufacturers that are the group’s main customers.
While Coulson controls more than 50 per cent of Ardagh’s voting rights, his economic stake is smaller. All Ardagh shareholders would receive a piece of the $300mn in accordance with the size of their stake under the proposal.
Control would then pass to Ardagh’s unsecured bondholders, which would also write down part of their debt. The group’s riskiest payment-in-kind bonds would be fully written off in exchange for a small minority stake in the business.
The unsecured debt is largely held by hedge funds, including London’s Arini Capital Management and Los Angeles-based Canyon Partners, which separately filed a lawsuit against Ardagh and Coulson in March alleging that a restructuring could siphon value away from lenders. Ardagh last month filed to dismiss the claim in New York courts on the basis that it contains “numerous fatal flaws”.
Ardagh is split into several different silos and subsidiaries, with its metals packaging division listed on the New York stock exchange. Debt at this listed Ardagh Metals Packaging unit, which has 24 per cent of its shares freely traded and held by other investors, will not be affected by the proposed restructuring.
Ardagh and Coulson declined to comment.
