INEOS brings financing talks to a successful conclusion
INEOS Group Limited announces that it has successfully reached agreement with its senior lenders on a package of amendments to the Group’s financing arrangements, including a reset of the Company's financial covenants.
Proposals, which required approval by two-thirds of the 230 strong banking consortium, have been agreed by over 96% of the Group’s lenders, without amendment.
“I am grateful for the strong support of our investors through this process. The covenant reset provides the necessary headroom and flexibility to progress our current strategy,” said Jim Ratcliffe, INEOS founder and chairman: “This positive outcome shows confidence on the part of the investors in the company, its strategy and the wider INEOS management team.”
The five-year business plan has been reviewed in great detail and ‘stress-tested’ by banks and their advisors. Based on realistic assumptions, it reflects the continuing macro-economic environment. INEOS has always actively managed its portfolio of businesses and will continue to do so to suit market cycle and investment requirements. The Company came into this downturn with operations that were prepared for normal bottom-of-the-cycle conditions and the fact that it remains profitable and cash generative bears testament to its resilience.
Negotiations began in the autumn of 2008 with a consortium of over 230 banks and investing institutions. 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.
On 25th June INEOS announced that the Sounding Group, advised by Houlihan Lokey Howard & Zukin (Europe) Limited (“Houlihan Lokey”) and Deloitte LLP (“Deloitte”), agreed to support a package of amendments to the Group’s financing arrangements. Today, over 96% of INEOS’ lenders confirmed their agreement.
Highlights of the package agreed today include:
- Reset of the Leverage, Interest Cover and Debt Service Cover covenant levels, effective from September 2009.
- Enhanced lender remuneration comprising a consent fee, increase in interest margin and a EURIBOR floor.
These new terms become effective on the 17th July 2009
Jim Ratcliffe added: “In addition I would also like to take this opportunity to thank all the stakeholders in INEOS - employees, customers, suppliers, advisors among many others - who have all contributed to and supported us through this process.”
Lazard & Co., Limited acted as financial advisor to INEOS.
For further information contact
Richard Longden +44 (0) 2380 287037
Edward Bridges +44 (0) 207 269 7176
Michael Grayer +44 (0) 207 187 2000.
Notes 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 18 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).
Context to the covenant reset
In December 2008, INEOS asked for and received from its lenders a covenant waiver while the Group faced very difficult trading conditions in Q4 2008 and poor market conditions driven by the general destocking in the chemical industry and highly volatile crude oil prices. The approval of INEOS’ covenant reset request follows the creation and presentation of a new five year business plan to lenders that had been drafted by INEOS, reviewed by the Group’s advisors PriceWaterhouseCoopers and Chemical Market Associates Inc., and further reviewed by the Sounding Group’s advisors, Houlihan Lokey and Deloitte.
Whilst visibility remains limited, current trading performance of the Group has been encouraging. Replacement cost (“RC”) EBITDA for April and May 2009 was €65 million and €79 million respectively. Year To Date RC EBITDA for the first 5 months of 2009 was €314 million, which was ahead of plan.
2009 Operating Budget
Following the publication of the Group’s Q1 2009 results on 24th April 2009 (see below) the operating budget for 2009 was delivered to Lenders as expected on 30 April 2009, the highlights of which were 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 for 2009 does not assume any major restructurings or divestments take place in the rest of the year.
Q1 2009 summary
- Based on management information Replacement Cost EBITDA for the first quarter was €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.
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, revenues and operating cash flow 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, labour stoppages and adverse weather conditions and natural disasters; IGH’s ability to realise 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 2008 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.