INEOS has now confirmed that it has obtained the required covenant waivers from its banks. They had little choice, as pushing INEOS into bankruptcy would have destroyed value on a massive scale for everyone concerned. But as the blog expected, lenders successfully demanded an increased interest charge in exchange for their consent.
Investors’ attention will now turn to the new business plan that the company has promised to present in Q2. Petchem and polymer markets will hopefully improve in Q1, after Q4’s fire-sales. But INEOS knows its real challenge will be to demonstrate its robustness in “normal” industry bottom-of-the-cycle conditions, such as the extended downturns of the early 1980’s and 1990’s. The waiver request has clearly dealt a serious blow to investors’ confidence. INEOS will have to work hard to regain it.