INEOS is not one to miss an opportunity, especially when it comes to managing its financial affairs more efficiently. And this year has been no exception
A robust performance and INEOS’ reputation as a company that can make money helped it to iron out three separate deals during the first half of this year – and slice a further €80 million off its annual interest bill.
“Although it means investors won’t make as much money in interest, it means INEOS can focus on strengthening the business, and is seen as a better ‘risk’, which is always good for lenders,” said Peter Clarkson, Head of InvestorRelations at INEOS.
The money saved in interest payments, on the latest €4 billion debt to be refinanced, is likely to be reinvested in the business.
“It is hard to say exactly what will be done with the extra cash flow,” said Peter. “But what it does do is give us more flexibility when we are considering business improvements or even some bolt-on acquisitions, to which we remain alert and opportunistic.”
Over the past four years INEOS has – in a succession of tactically smart moves – refinanced the $9 billion it borrowed in 2005 to buy Innovene, BP’s olefins, derivatives and refining subsidiary.
And in doing so, it has helped to save the company €405 million in interest charges.
“Since 2011 we have been in a process to improve the debt structure of the group after the restrictions that were put in place after the financial crisis of 2008,” said ChiefFinancial Officer Graeme Leask. “That is what has enabled us to reduce our cash interest bill from €763m in 2010 to €358m now.”
In April 2012 INEOS 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.
Michael Moravec, head of European high-yield syndicate, described it as a staggering achievement by a company.
“Management can now concentrate on what it does best, which is managing a chemicals business,” he said at the time.
INEOS has now refinanced most of its loans that were nearing maturity.
“Taking out the next big tranche of debt requires us to pay a significant premium now, but the premium will reduce and may be a more attractive proposition next year,”said Peter.