INEOS has once again shown its ability to move quickly to make the most of an opportunity. Its latest decision to take advantage of favourable loan markets has just saved the company $140 million a year in interest payments.
Finance director John Reece said the perfectly-timed deal would now mean significantly lower annual interest costs, which helps retain more money in the company to develop the business.
In a note to all staff, chairman Jim Ratcliffe described the latest refinancing deal as a ’very successful outcome’.
“The financial markets have become increasingly favourable during the course of this year,” he said.
INEOS is now paying 4% interest on its $3 billion term loan instead of 6.5%. “That is the largest interest rate fall of any loan refinancing by a company this year,” said Jim.
In addition INEOS raised $2.4 billion of new debt, in a mixture of loans and bonds, and paid down $2.4 billion of older more expensive debt.
Credit analysts believe that INEOS is taking advantage of the loan markets to keep costs as low as possible so that it can weather the storm of any potential downturn.
Whatever happens, it was another shrewd move by INEOS, which last year made history in the financial world when it achieved the largest-ever covenant-lite loan for a European company and the largest globally since the credit crunch began in 2008.
That move in April 2012 was described as a ‘staggering achievement’ by financial analysts.
“You really have to take advantage of the credit markets when they are there because they are very cyclical,” John told INCH magazine last year.
Malcolm Stewart, a partner at Ondra Partners, a long-standing adviser to INEOS, said the timing had been perfect.
“They nailed it,” he said.
Standard & Poor’s raised its rating on the company to B+ from B, noting a “resilient” 2012 performance in North America that “largely offset” difficult European results.