INEOS successfully negotiates debt covenant waivers
10 December 2008 14:43 [Source: ICIS news]
By Nigel Davis
LONDON (ICIS news)--INEOS has successfully negotiated debt covenant waiver discussions with its major banks, the broad-based chemicals group said on Wednesday.
Barclays Bank plc, as agent for the lenders, confirmed that over 90% of the bank syndicate by amount voted and 100% of these voted in favour, it added.
“Lenders have given their support in the company showing confidence in the management team and the underlying business,” INEOS said in a statement.
“We are pleased that senior debt-holders have endorsed our pro-active steps to address the exceptional trading conditions,” INEOS CFO John Reece, said. “
The result highlights the long-term support that exists for the company and its management team.”
Reece said the focus now was on trading through the near-term market conditions expected in the first quarter of 2009.
“We remain well positioned in the long-term due to our portfolio of businesses all of which are capable of trading through normal bottom-of-the-cycle conditions,” he added.
INEOS is drawing up a new five-year business plan which it expects to present to stakeholders at the end of the first quarter of 2009.
INEOS approached its 230 principal banks, led by Barclays Capital and Merrill Lynch banks just over two weeks ago asking for waivers principally on its leverage covenants.
These had been set at a level of net debt to EBITDA (earnings before interest, tax, depreciation and amortisation) of 4.6 times.
The company had projected full-year EBITDA of between €1.7bn ($2.2bn) and €1.8bn before nventory holding losses of €400m and exceptional charges of €180m that could have led to a breach of debt covenants.
To avoid that situation, the company requested a waiver leverage, debt service and interest cover covenants until it had better visibility across the business which it expected towards the end of the first quarter.
INEOS said long-term support for the company had been shown during discussions with its lenders. The company had, however, increased is offer on the margin it was willing to pay over Libor on its senior debt to between 175 and 225 basis points from an original range of 100 to 125 basis points. The original offer also included a margin of 50 basis points on the amount of debt held.
The company’s leverage ratio will be tested at the year end but has been raised to 5.25 times which, an INEOS spokesman said “provides sensible headroom for us”. There will also be changes in the way EBITDA is calculated in the final quarter to take into account what INEOS has called “violent swings” in foreign exchange rates.
The significant weakening of the pound sterling has had an impact on the additional charges the company forecast for the fourth quarter.
The London interbank offer rate (LIBOR) has fallen sharply since INEOS first said it had approached its major lenders on 17 November. The rate on that date was 4.15%. The 9 December rate was 3.28%.
($1 = €0.77)
To discuss issues facing the chemical industry go to ICIS connect
ICIS Copyright © Reed Business Information 2009
Author: Nigel Davis+44 20 8652 3214
< previous article(VIDEO - ICIS news Europe Lunchtime Bulletin 30 October 2009)
For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial
to ICIS news - the breaking online news service for the global chemical industry.
Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free
trial to ICIS Chemical Business.