Credit rating agents Moody's has upgraded Paul Coulson's Ardagh Glass in light of an improvement in its trading position and its €660 million takeover of Rexam, the world's biggest drinks can manufacturer.

Moody's said in a note it had assigned a stable outlook to the glass business, which has €175 million in senior notes due in 2013 and €126.5 million in senior payment-in-kind notes due in 2015. The agency upgraded the group's corporate family rating to B2 from B3, increased its rating on the 2013 notes to B3 and raised its rating on the 2015 notes to Caa1.

Volume growth, cost savings and more flexible pricing contributed to the recent stabilisation in Ardagh's business and a reduction in its negative cash flows, Moody's said. It also said the acquisition of the Rexam assets would reduce Ardagh's dependence on the British market.

"The stabilisation of Ardagh's declining operating performance, as experienced in the first quarter 2007, driven by sustainable factors as well as the acquisition of Rexam's glass assets, which is designed to increase the company's market presence and regional diversification and offering synergy potential, were the main factors supporting the rating upgrade," said analyst Martin Kohlhase.

Noting that a market entrant in Britain and high natural gas prices had put Ardagh under pressure, Moody's said the inclusion of the Rexam business enlarged the group's asset base and offered room for rationalisation. The deal was still subject to the approval of Poland's competition authorities, but the transaction decreased the group's leverage sizably from an elevated level. It said the acquisition was effected at a ratio of 5.3 times debt to historic earnings before interest tax depreciation and amortisation.