Two hedge funds have sued Ardagh Group and its controlling shareholder, Paul Coulson, alleging that a restructuring plan for the company’s debt would amount to fraud, designed to “siphon value away” from certain bondholders in favour of the businessman and other insiders.
Ardagh, which the Irish financier built into one of the world’s leading glass and metal packaging businesses over the past quarter of a century, outlined a proposal last week that would see unsecured creditors write off $1.6 billion (€1.4 billion) of what they are owed in exchange for taking over the group’s insolvent glass business.
The plan also envisages Ardagh spinning its shares in its New York-listed beverage cans business, Ardagh Metal Packaging (AMP), into a new company (NewCo). This would be 80 per cent owned by Mr Coulson and other existing shareholders – with the unsecured creditors receiving the remaining 20 per cent.
Ardagh had net borrowings of $10.5 billion at the end of December, equating to 7.6 times its earnings before interest, tax, depreciation and amortisation for 2024.
However, the ultimate parent company of the group, ARD Holdings, has an estimated $12.5 billion of net debt – which has become unsustainable in recent times amid a cyclical decline in demand for glass bottles and spike in borrowing costs.
The two hedge funds, London-based Arini and Los Angeles-headquartered Canyon Partners, own more than 30 per cent of Ardagh’s £400 million of unsecured bonds that are due to fall due in July 2027.
[ Ardagh in talks to hand control of glass business to bondholdersOpens in new window ]
The funds’ complaint, lodged with the Supreme Court of the State of New York last week, alleges Ardagh set up a holding company in 2022 between itself and AMP that was designed to distance the beverage cans asset – which currently has a market value of $1.72 billion and is 76 per cent owned by the group – from claims by group bondholders. The legacy glass business of Ardagh was already insolvent at the time, it claims.
“The ‘existing shareholders’ that own 80 per cent of NewCo, an empty shell, are providing no consideration in the transaction,” according to the funds’ complaint, lodged with the Supreme Court of the State of New York.
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“Without contributing any new value beyond the value of the metals business that Ardagh already owned, insiders will obtain 80 per cent of Ardagh’s most valuable asset, all to the detriment of Ardagh and its creditors.”
It added: “These transactions not only breach the company’s debt documents, but also pursuing them breached the company’s controllers’ fiduciary duties. The transactions also are actual and constructive fraudulent transfers under the law of several jurisdictions.”
A spokesman for Ardagh said the group “strongly refutes the complaint and believes it is without merit”. It will respond to the claim “in due course”, he said, adding that the group “remains in constructive discussions with its noteholders and is focused on putting a sustainable capital structure in place”.
Mr Coulson controls Ardagh through an 18.8 per cent direct stake in its ultimate parent company and a 52.4 per cent interest in a vehicle called Yeoman Capital, which owns 33.9 per cent of the group. He effectively owns 36.6 per cent of the equity in a business that traces its roots to the Irish Glass Bottle Company, founded in Dublin in 1932.
Meanwhile, holders of some $1.8 billion of risky bonds issued by a holding company above the operating Ardagh Group are expected to lose almost all of what they are owed. These bonds are currently trading at between 4.7 and 7 per cent of their original value.
