INEOS confirms trading performance, highlights 2009 budget and next steps in covenant waiver process
- INEOS Group Holdings PLC ("the Group") confirms an improving trend in its trading performance in the first quarter of 2009.
- Full year revenues of €15.2 billion and full year Replacement Cost EBITDA of €1.1 billion are budgeted for 2009.
- Supports appointment of advisors to the “Sounding Group” of Lenders in considering the 5-year business plan and operating budget for 2009
- Requests extension to certain covenant waivers, to allow sufficient time for the Sounding Group and its advisors to consider the company’s proposals.
In January 2009 INEOS announced that an informal group of lenders (“the Sounding Group”) had been formed in order to consider the company’s 5-year business plan and operating budget for 2009.
Following the publication of the Group’s Q1 2009 results on 24th April 2009 (see Notes to Editors below) the operating budget for 2009 was delivered to Lenders as expected on 30 April 2009, the highlights of which are as follows:
- Full year revenues of €15.2 billion and full year Replacement Cost EBITDA of €1.1 billion
- Forecast net operating cashflow for the year sufficient to enable the Group to service its expected debt service commitments for the remainder of the year. This would be the case whether or not trading conditions improve beyond current levels.
- The operating budget does not assume any major restructurings or divestments take place in the rest of the year.
With the provision of the operating budget to Lenders, and the delivery of the 5-year business plan due imminently, INEOS and the Sounding Group have agreed to the appointment of Deloitte LLP (“Deloitte”) and Houlihan Lokey Howard & Zukin (Europe) Limited (“Houlihan Lokey”) as independent accounting adviser and financial adviser respectively to the Sounding Group. It is envisaged that the appointment of these advisers will assist the Sounding Group and Lenders in their decision making process and provide an additional level of comfort regarding a future consent request and the projections contained in the Group’s business plan.
As a result of the proposed appointment of advisors to the Sounding Group, the recent delivery of the operating budget for 2009 and the imminent delivery of the Group’s 5-year business plan, INEOS is requesting an extension to the waiver of the requirements to test certain financial covenants and provide certain compliance certificates in respect of the testing period ended on 31 March 2009 to 17 July 2009.
The extension is being sought to:
- allow sufficient time for the Group’s business to be reviewed by the accounting and financial advisors appointed to act on behalf of the Sounding Group; and
- prepare any further consent requests to be presented to Lenders in June 2009.
Lenders are being asked to comment to the request by 22th May 2009.
PricewaterhouseCoopers has reviewed INEOS’ 5-year business plan. Chemical Market Associates Inc., a leading chemical industry consultant, and Purvin & Gertz a leading refining industry consultant, have provided independent market reviews.
Lazard & Co., Limited is acting as financial advisor to INEOS.
Richard Longden +44 (0) 2380 287037
Note to editors
INEOS (www.ineos.com) is the world's third largest chemicals company; a leading manufacturer of petrochemicals, specialty chemicals and oil products. Comprising 17 businesses, with a production network spanning 64 manufacturing facilities in 14 countries, the company produces more than 57 million tonnes of petrochemicals, 20 million tons per annum of crude oil refined products (fuels). INEOS employs 15,500 people and has sales of around $47bn.
Q1 2009 summary
Based on management information INEOS expects that Replacement Cost EBITDA for the first quarter was in the region of €170 million.
The Group confirms an improving trend in its trading performance in the first quarter of 2009. Market conditions have shown some signs of slow but steady improvement during the quarter reflected in RC EBITDA for March in the region of €73 million.
Fixed costs in the Group are line with budget to achieve the planned fixed cost savings of €200 million in 2009. The relevant actions have also taken place to reduce capital expenditure levels to the target of €250 million in 2009.
INEOS experienced further operating cash inflows in the quarter as the Group has continued to focus on cash management and liquidity.
The Group implemented its working capital improvement programme, which has successfully reduced physical inventory levels by 20%. Net debt was approximately €7.5 billion at the end of March 2009.
Cash balances at the end of the quarter were €560 million. Repayments under the securitisation facility amounted to approximately €210 million in the quarter, and senior bank interest of €210 million was paid in March.
Lazard & Co., Limited
Lazard & Co., Limited is acting for INEOS Group Holdings Plc, INEOS Holdings Limited and INEOS US Intermediate Finance LLC and no one else in connection with the matters referred to in this announcement and will not be responsible to any person other than INEOS Group Holdings Plc, INEOS Holdings Limited and INEOS US.
Forward looking statements
This announcement includes “forward-looking statements”, within the meaning of the U.S. securities laws, based on INEOS Group Holdings plc’s (“IGH”) current expectations and projections about future events. All statements other than reported financial results and statements of historical facts included in this announcement may be deemed to be forward-looking statements, including, but not limited to, estimates of IGH’s EBITDA for 2009 and expected future cost savings. Words such as “believe”, “expect”, “anticipate”, “may”, “intend”, “will”, “should”, “estimate” and similar expressions or the negatives of these expressions are intended to identify forward-looking statements. These forward-looking statements are subject to a number of risks and uncertainties, including: IGH’s high degree of leverage and significant debt service obligations, as well as future cash flow, profitability and liquidity; a continuation of, or further negative developments in, adverse financial market conditions that may affect IGH’s ability to incur or refinance indebtedness and the terms of its existing and future indebtedness; changes in raw material costs and supply arrangements, including rapid fluctuations in the costs of feedstocks; the cyclical and highly competitive nature of IGH’s businesses; adverse developments in global economic conditions; currency fluctuations; disruptions in production at IGH’s facilities, including due to plant and equipment failures, labor stoppages and adverse weather conditions and natural disasters; IGH’s ability to realize synergies and cost savings; and, current or future environmental requirements and the related costs of maintaining compliance and/or addressing liabilities. Reference should be made to IGH’s 2007 annual report, including the section therein titled “Risk Factors”, for a description of certain of these risks and uncertainties. In addition, from time to time IGH or IGH’s representatives, acting in respect of information provided by IGH, have made or may make forward-looking statements orally or in writing and these forward-looking statements may be included in but are not limited to press releases, filings with the regulatory authorities, reports to IGH’s security holders and other communications. Although IGH believes that the expectations reflected in such forward-looking statements are reasonable, IGH can give no assurance that such expectations will prove to be correct. IGH does not undertake any obligations to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.