INEOS asks lenders for more financial headroom on debts

25 June 2009 15:03  [Source: ICIS news]

By Mark Watts

LONDON (ICIS news)--INEOS has asked a group of lenders to approve changes to its debt covenants to give it more financial headroom, the privately held UK chemicals company said on Thursday.

INEOS said the proposed package of amendments would provide “a solid foundation for the group to address current market conditions and add focus on the implementation of its long-term strategy”.

One group of lenders, the so-called “sounding group”, had already agreed to the proposals, the company said.

Senior lenders were being asked to vote on the request by 15 July.

“INEOS is a business that has always planned for bottom-of-the cycle trading conditions; we remain EBITDA (earnings before interest, tax, depreciation and amortisation) positive and cash generative and the business is tracking ahead of plan for the first five months of this year,” said CFO John Reece.

“Following completion of this process we will be well positioned to execute on our current strategy,” he added.

The proposals, if accepted, would give the company more headroom on leverage, interest cover and debt-service cover levels.

INEOS said trading had continued to show an improvement from the lows experienced at the start of the year.

Replacement cost EBITDA was €314m ($436m) for the first five months of 2009, which INEOS said was 8% ahead of its estimate.

INEOS added that fixed costs in the group were in line with budget to achieve the planned fixed-cost savings of €200m in 2009.

The company had requested waivers from certain bank covenants in November 2008 as the impact of the collapse in chemicals prices and demand became more widely apparent.

Lenders were told that net-operating cash flow for the year was expected to be sufficient to enable the group to service its expected debt service commitments for the year “whether or not trading conditions improve beyond current levels”.

INEOS is the UK’s largest private company and one of the world’s biggest petrochemicals producers.

($1 = €0.72)

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By: Mark Watts
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