Ineos agrees higher interest charges with lenders

Economic recovery can’t come soon enough for Ineos. After 7 months of negotiation, it has finally agreed new covenants for its €7.3bn of debt with its major lenders. These will now be put to all 230 lenders for approval by 17 July. But the price is high:

• Initially, Ineos was paying c2.5% over euro base rates (Euribor)
• Now this premium is to rise to 6.50% on €5bn of loans

The Financial Times estimates that this will cost Ineos €260m a year, as well as €82m in one-off fees.

And in spite of the agreement, bond markets remain nervous about the company’s ability to eventually repay its debt. According to Bloomberg, it now costs €6.16m to insure €10m of Ineos debt against default, plus €0.5m a year. In January 2008, the upfront cost was just €716k, with no annual payment.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. The aim of this blog is to share ideas about the influences that may shape the chemical industry over the next 12 – 18 months. It will try to look behind today’s headlines, to understand what may happen next in important issues such oil prices, economic growth and the environment. We may also have some fun, investigating a few of the more offbeat events that take place from time to time. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

,

One Response to Ineos agrees higher interest charges with lenders

  1. Robbo 26 June, 2009 at 10:02 am #

    Let’s hope that there isn’t another big correction in the oil price for Ineos. (http://www.icis.com/blogs/chemicals-and-the-economy/2009/06/gasoline-markets-slip-financial-markets-stumble.html) The last thing the company wants at the moment, I guess, would be to have to take a big inventory loss this year as well as last. I think they need to sell an asset and hope for a gradual fall in crude prices.

Leave a Reply